QDROphile

Plan terms may have to be amended to describe the new approach to diversification.

Are you concerned that a particpant is entitled to exercise diversification rights at an earlier date than the expected distribution on termination? Or do you mean that the ESOP has been frozen? Freezing the ESOP will not excuse the plan from providing diversification.

I doubt that the plan document is silent and I suspect that the plan document provides for distribution in normal form (usually a single life annuity) when payments are required to start unless another form is selected. You can't expect the plan to address this specificall with respect to QDROs. The ODRO requires payments to start, so notify the AP what will happen if the AP does not respond in a reasonable time, taking into account any mandated notice periods. If the AP is unresponsive, then start payments. This assumes the AP has choices and that you have the relevant information to determine the payments. You might compress the process if the AP has no choices. #4 is negative for several reasons. Refusal to cash checks is a different problem that does not inform the timing of distribution.

Directly or indirectly the calcuation period is specified. If you think it is not specified, a match function that is based on compensation probably encompasses compensation for the entire year. The timing for delivery of contributions may be a differrent matter, but should be addressed in the document, if only to say that amounts may be contributed during the year. A true up may be inferred from a combination of calculation based on the entire year and ability to deliver contributions during the year. The document is inadequate if it does not cover the matters. What usually happens is that the document is based on the year and payroll-heads dictate pay period matching with resulting operational failures.

I don't mean to hijack the post, but could you explain what you mean by an in-plan transfer? I have not encountered any plan provision that would allow amounts from participant A's account to be transferred to participant B's account without an intervening distribution. Maintaining an account for participant B as a beneficiairy account as participant A's beneficiary is OK, but I think such an account would need to be maintained as an account separate from the participant B account. Depending on how one defines "account" at a minimum the former participant A account balance woule be subject to different terms than participant B's account (e.g. the amount would be distributable). I suppose one could designate all amounts held for the benefit of B as B's "account," but that account would have to be broken down by attribute and the beneficiary account would effectively be recognizable. By contrast, a distrubution to B and rollover to B's account can fit normal document terms because a participant can have rollovers in the particpant's account and rollovers are specifically described by law. I am not aware of any legal underpinnings for how I imagine an in-plan transfer would occur.

"It seems to me that the regulations do not exclude service credited before a company became part of a controlled group." The regulations do not exclude service credited before a company becomes part of a controlled group, but they do not include such service either. Since there is no rule that service before becoming an employee of the controlled group is to be counted (see section 401(a)(4) regulations that allow award of prior service credit if the award meets certain conditions), the regulations are simply establishing that all service as an employee in a controlled group, even in an ineligible position, count as service. Co. B employeees did not become employees of the Co. A until January 2012. That is when serivce starts for Co. B employees unless the employer chooses to award prior service credit and the conditions fit section 401(a)(4) regulations (which they should). Co. B employees have 3 months of service as of 4/1/2012 -- or a hire date of 1/1/2012, if you will. That does not mean that they cannot be excluded from the Co. A plan either before or after 4/1/2012. This view of controlled groups is exactly the same as the view that lets us terminate 401(k) plan before acquistions and not have the buyer's 401(k) plan be a replacement plan.

The answer should be in the plan documents, which would include written loan policies. The plan can be more restrictive than the law.

You might ponder Treas. Reg. section 54.4975-7(b)(5), which may be reflected to some degree in plan terms.

All of the matters that you are dressing are local court rules and procedures that have nothing to do specifically to do with qualifiction of a domestic relations order except the court's desire to see that the plan administrator has no objection to the proposed form of the order. While some of the matters appear to be relatively typical and you might get a response, this is not a very good forum for advice about such details. Very often someone in the clerk of court office will be helpful.

The law allows loans to be rolled over directly from a 403(b) plan to a 401(k) plan. The plans or those who administer the plans might not be accommodating.

Correction vs. true-up. Good point, but a systemic problem must be corrected with the first correction of the plan faliure. A plan cannot correct the results of a systemic problem under SCP year after year.

Your concern appears to be well founded. The match could exceed what is specified in the plan terms.

legort69: This is completely off-topic, and I can't quite tell from your description, but I am always suspicious when some limit relating to deferrals applies with respect to the 401(a)(17) limit on compensation that the plan is, shall we say, not optimally designed because of a misconception about how the 401(a) (17) limit operates.

I thought source matters in an EPCRS correction of a section 415 violation.

BG5150's post is based on an IRS ruling that you should review for the appropriate standard. There has to be a risk of liability and that requires an implication of fiduciary breach. It is not pretty stuff and requires serious consideration, but there are not other good approaches.

One way to look at it is that two mistakes occurred, both involving a failure to implement an election properly. Under EPCRS principles, all failures should be cured. Under EPCRS the "client's" solution is improper in two respects, (i) not correcting the Roth deferrals that were too much, and (ii) not following the prescribed method for correcting missed regular deferrals (the method does NOT prescribe corrective contribution of 100% of the missed deferral). The proposition might be approved by the IRS under VCP, but I think it is quite risky under SCP.

The IRS buys into the idea that the termination of the A plan occurred under Employer A. When corporation A stock was acquired by Corporation B, A became a member of the Employer AB controlled group. The B plan of Employer B and Employer AB is not a successor plan to the A plan because the A plan was never maintained by Employer AB. The A plan was terminated before Corporation A became a member of Employer AB. Never mind that the wind up and liquidation of the A plan is managed by personnel of Employer B. Never mind that a plan is not terminated for tax purposes until all of its assets have been distributed.

I would not self correct. The 90-day window seems to be a built-in safeguard for election errors involving oversight. Despite the office manager's faith, I think the presumption would be that a protest after 90 days is not credible or not effective. If the plan had the timely election form showing an election of zero deferral, the conclusion might be different. The plan can always ask the IRS to approve the distribution.

The plan adminstrator (fiduciary) should be having heart palpitations. This is great proof that the plan's administrative systems are improper and it is the fiduciary's fault. The fiduaciary needs training and advice about its responsibilities and it shoud start doing its job. If the fiduciary was appointed by a fiduciary, the appointing fiduciary should become involved and evaluate the situation to see if the plan administrator is capable of performing properly and is getting the necessary religion about its responsibilities. I am slightly biased. I believe that a multiple institution arrangements are inherently irresponsible and can only be appropriately maintained with very strict fiduciary vigilence and control. That includes negotiating written arrangements with the institutions that deviate from the institution's usual forms.

If you had two 401(k) plans I would suggest you look at the nonsurviving plan as continuing, as amended, in the merged plan, rather than as an empty shell. You would still file a final Form 5500. Thereafter, you mostly forget about it. To the extent that you can see any of the plan in the merged plan, it is expressed in the terms of the merged plan, without separate effect as a separate plan. I have not thought through any differences with 403(b) plans. You correctly observe that the transaction would be a merger/transfer rather than involving distributions and rollovers.

Off the record possibility: ERISA would never stand for amounts to be taken from employees and never actually be delivered to the plan. The IRS steps away from the tax fiction that makes elective contibutions "employer" contributions to recognize the legitimacy of the ERISA view. But don't ask the IRS to say that.

If you are a lawyer, please do not use "Esq." Despite its prevalence in certain parts of the country, is is a misuse of the term, unless you are of the school of language that says there are no rules and no standards and words should not be bound by any historical meaning. Whenever I see it, I think of a seven letter word starting with "a."

Be careful. If you look at the guidance, you might find that it is OK for the employer to cover a per capita fee at different rates for employees than for former employees. If there is a $50 fee, the employer can cover $10 for the employee and zero for the former employee. That makes for an account charge of $40 to the employees and $50 to the former employees, but the fee is still the same for each participant.

The tax code considers the loan to be outstanding until "actually" distributed (offset in a distribution). If correction is not possible under EPCRS because of the circumstances, the loan may not be able to be rehabilitated to its original tax status ("undo the default"), but if the loan is still outstanding the borrower can continue to pay the loan. The payments will create basis in the account. You need to determine if the Form 1099 reported a deemed distribution or an offset distribution. You should also consider what EPCRS has to offer.

Some plans provide for the amount to be forfeited rather than appear to pay a TPA for a service that is not rendered. I would prefer to defend a forfeiture that is used for the benefit of participants in some way.