QDROphile

How can the employer the employer contribute through a cafeteria plan, other than the elected salary reduction amounts? If you you look at the plan as some pages with a staple, then the employer also contributes through a cafeteria plan to the extent the employer covers part of the premium cost of the health plan. Would you consider that part of the 401(k) defintion of compensation? Nothing happens under section 125 unless it involves a choice between cash (taxable) or a nontaxable benefit. That is the point of the 401(k) rule. Elective salary reduction is added back because the individual could have received cash and should not be penalized under the 401(k) plan by choosing the cafeteria plan benefit instead.

ERISA regulation section 2530.200b-3 is central to determining service and speaks in terms of employees. See also IRC section 410(a)(3)©. Regulations under IRC section 401(a)(4) have provisions for imputing service that is not performed as an employee of the employer.

In support of david rigby's response, remember that the funds that may have been set aside for payment of the deferred compensation are assets of the employer.

I can appreciate that an ERISA lawyer might want to have a vague provision, but it will be difficult to persuade me to accept an ambiguous provision. Parroting a regulation about permissibility of payments, especially because it it not necessary to include such a statement in the plan document for purposes of section 409A in the event something compels the payment contrary to the plan terms, is incompetent if the employer does not wish to permit the payment. Including a provision that precludes the payment, including express preclusion of attempts that encompass most domestic relations orders, is incompetent if the employer does not intend to resist division of interests under domestic relations orders.

First thought (revised): The drafting is incompetent unless it was intended to create ambiguity. Ambiguity is generally not desirable and the acceleration provision was not necessary in the plan to provide ability to accelarate if the plan adminstrator felt that the law compelled assignment despite the anti-assignment provision. Futhermore, I disfavor such an anti-assignement provisions as applied to domestic relations orders for various reasons, including that I am unsure if the provision can hold up against a judicial order to assign pursuant to a domestic relations order. Therfore, I conclude that the drafting is incompetent unless it was ordered against the advice of the drafter, who made good arguments why the both of the provisons should not be included in the forms that ultimately appeared in the plan. Interpretation: I think the plan administrator can interpret the provisions either way, especially if other plan terms (not revealed) give the plan administrator the express authority to interpret. (1) The PA can give effect to the anti-assignment provision and interpret the acceleration provision to apply only in the event that it is ultimately determined by appropriate legal proceedings that assignment pursuant to a domestic relations order must be given effect despite the anti-assignment provision . The PA would reject a domestic relations order based on the anti-assignement provision, and continue resistance until after losing a long, drawn out legal battle (see "to the extent necessary to comply"). (2) The PA could instead give effect to a domestic relations order by interpreting "to the extent necessary to comply" as not requiring resistance to test the enforceabilty of the order. I would be somewhat skeptical of (1) because if (1) was truly intended, the acceleration provison concerning DROs is legally not necessary to allow the beaten-up PA to concede to legal compulsion and pay accoding to the terms of a DRO. That lends credibility to (2) because if the acceleration provision is not necessary if the anti-assignment provision loses, the explation for having the provision in the plan is that it overrides the anti-assignement provision when the PA decides it is prefereable not to test the uncertain or prevailing law on the effectiveness of the DRO despite the annti-assignment provision. There is also a middle ground. The PA can reject attempted DROs. If the proponent goes away quietly, hurray for the anti-assignment provision (which I still think is not the better choice for policy reasons). If the proponent pushes, the PA can decide to give up easily rather than waste time and money defending the anti-assignment provision based on the PA's assessment at the time of the prospects for cost and success of resistance.

OK, I will play along. If the following is the other provision in the plan, then it does not conflict; it is the same as saying that the sky is blue. It has nothing to do with the plan. §1.409A-3(j)(4) allows for the acceleration of Plan payment to the extent necessary to comply with a domestic relations order

"Let's say the document contains this acceleration provision but also contains the nonassignability provision below ***" "Your thoughts, please." I think one must be able to look at all the relevant provisions before one can interpret.

While resignation is certainly an option and may be the most attractive choice for the adviser because of general risks of dealing with people who do not want to comply with the law, is there some governmental or professional regulatory or ethical mandate that compels resignation? Generally, an advisor who is not a fiduciary, does not mis-advise, and does not assist (including by concealment) should not be responsible for malfeasance of the responsible authorities. Egregious violations such as theft fall under other considerations. An adviser has no resposibility to correct a prohibited trnasaction unless the adviser is a party to the transaction. The prohibited transaction must be properly reported (e.g. on Form 5500). I am not arguing against the wisdom of resignation, but I would like to know if there is some authority that all the responders are observing.

The question is too broad. Part of the answer is that an exclusion cannot be effective for those who have qualified for the contribution/accrual before the amendment, by accruing more than 1000 hours for example.

jpod: Are you saying that if an employer meets the 401(k) plan definition for maintaining a church plan that the 403(b) plan of that employer should not be subject to 410(b) requirements (just as a 401(k) plan of that employer would not be subject to 410(b))? Or do you have someother analysis or authority?

If the employer by plan design or administration participates in the ordering of the contributions, so that the emplyoyee is not completely responsibile and in control of the amounts that go into a plan, both plans are ERISA. For example, if deferrrals are automatically switched from the plan with the match when the deferral for maximum match is attained, both plan are ERISA plans. That is not to say that both plans are not ERISA plans anyway. Employer participation in the integration of plan operations just makes it certain. I also happen to be one of those who believe that all 403(b) plans are ERISA plans unless they have an express exemption, such as church and government plans.

What you describe is the plan cutting the check to a person designated by the estate as a courtesy to the estate to save the estate some administrative steps. The tax reporting by the plan is still that the plan distrubuted to the estate. This does not seem like a huge benefit to the estate and it could implicate the plan as a conspirator in some evil machinations by the estate or the estate beneficiary to evade taxes or something else like a bogus rollover. The plan does not owe the estate any accommodation. It only owes the distribution.

If it is all about the employee's election, then we are talking CODA. This can also be a problem under section 125 and I see a lot more of it under section 125. The employee forgoes health coverage and gets higher pay compared to an identical employee who gets employer provided health coverage.

You might consider how this fits with the rules on one-time irrevocable elections.

Although most defined contribution plans, including 401(k) plans, are designed to allow distributions after termination of employment, they can be designed to hold the funds until retirement age. Age 59 1/2 is a common age for access among such uncommon designs. The amounts held under the plan are not the "company's" funds. A church plan is not subject to ERISA requirements unless it elects to be covered. SPDs are among ERISA requirements. None of this post is a comment on your circumstances.

Treas. Reg. section 1.411(a)-11(e)

Perhaps the most civilized and practical thing to do is amend retroactively to provide for a true-up.

You are correct that an eligibility definition based on measure of service or a proxy for measure of service could be a problem under section 410(a) even if the excluded group does not cause failure under section 410(b).

The plan cannot require SSN or date of birth as a qualification requirement, so a mistake is not relevant to qualification unless it calls into question the identity of the participant or alternate payee, which is exteremely unlikely with a difference if a digit. The plan can require a SSN as a condition of distribution because the plan has to report. The plan can require a date of birth if needed to compute a benefit (defined benefit plan) or to comply with required distribution rules (really lame if the QDRO is administered correctly). The plan should not require that the SSN or date of birth be provided in the order.

You are so optimistic about the capability and performance of drafters.

Review of a domestic relations order might be interesting under those circumstances. Which plan does the order "clearly specify"?

The plan may have a blackout period in connection with the change of investment provider; appropriate advance notice will be required. The restatement need not be effective as of the pror January 1 (or other first day of plan year). Care shoud be taken either way to be sure the plan operates in accordance with its terms. Are you serious about the scope of allowable investments? If the plan is open to so much trouble, one might think it would indulge in a custom document.

A 403(b) plan of a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization is exempt from all 403(b) discrimination rules. Is the exemption from the rules listed in Treas. Reg. section 1.403(b)-5(a)(1) -- borrowed from the qualfied plan rules -- also conditioned on being a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization or is there room for exemption from the -5(a)(1) rules based on the section 414(e) church plan standards? For exemple, a non-electing church plan under section 414(e) that is not the plan of a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization would not be subject to by the current provisions of section 410(b) if the plan were a qualified plan. If the same organization had a section 403(b) plan, would it be subject to the post-ERISA section 410(b) standards?

What are you doing about spouse consent?

Section 72(t)(2)© is up for interpretation, but I think the intent is that the 10% additional tax does not apply. No comment on the specific code for the form.