QDROphile

The response reasonably assumes the tha 401(k) plan uses the safe harbor for hardship distributions and that the same employer sposors both palns. If you don't like the answer, consider amending the hardship provisions to avoid the suspension.

A typical "marital portion" provision will take into account the entire accrued retirement benefit because it is recognized that defined benefit plan accruals are are often not linear, and are back loaded. The approach varies by circumstance and local custom, such as whether or not you are in a community property jurisdiction. It is possible that (a) you misunderstood, (b) someone did not explain it well to you or misrepresented the meaning, or © the document you approved was changed without your consent. Relief is unlikely for (a), (b) is difficult to prove and may not matter, and © is difficult to prove unless you have a document record. You are almost certain to be able to change the order if your fomer spouse agrees (relief from (a)). What sort of help are you asking about?

If you want to be a stickler about prohibited transactions, this is one. Carrying out your desire to help the charity is a use of IRA assets for a personal (i.e. not retirement savings) benefit. The more you make it look like not a conventional investment, the more you make it look like a prohibited transaction. For example, not having a conventional repayment schedule indicates that some other interest is being served. Your IRA is for your retirement, not for passing wealth to another person -- a scheme that does not pay until your death is another indication that something other than a benefit to your iRA is going on. I don't care what all of the life insurance junkies may argue about the accepted use of life insurance to fund retirement benefits. I am referring to some pretty strong evidence of an improper benefit being served by use of IRA assets. The DOL believes that intangible benefits are considered. They tend to be more difficult to prove.

It is not necessary to have separate trusts under the master trust.

The C plan need not have provisins for matching contributions that will never be received as contributions. The documentation of the transfer of the matching contrbutions to the C plan, however that is done, should acknowledge that the matching contributions will be accounted for appropriately, which means separately if you want to be sure not to have unexpected trouble.

Does the employer consider her to have health insurance coverage?

See sections 72 and 414(h) of the Internal Revenue Code.

If the 403(b) plan is terminated, the participants cannot be required to roll over distributions to the 401(k) plan. A rollover is not a distribution option. A direct rollover is an option for what a participant can do with an eligible rollover distribution. If participants have only annuity payment options under the 403(b) plan, no direct rollover will be possible because annuity payments are not eligible rollover distributions. Offering a lump sum distribution option will provide a participant with the opportunity to elect a direct rollover to the 401(k) plan.

Of course. Haven't you heard of a Deer John letter?

Even if you believe in the theory of rolling cure, may a responsible fiduciary allow recurrent defaults without at some point requiring the loan be brought current (e.g. by payment or reamortization) as a condition of reinstatement?

A common condition of correction under EPCRS is that persons who are affected by the correction be notified. I don't see how a notice can be given effectively without some explantion. QNECs are part of other kinds of corrections and adjustments. I think a fiduciary has to explain account entries, especially extraordinary ones, when asked. A participant has a right to know if the particpant is getting proper contribution credit. I would not advise an ERISA fiduciary to refuse to explan an account entry.

Even though ERISA does not apply, I agree with your thought that the Code should not be be offended if government plans pay expenses from plan assets in a similar way as private sector plans. I don't think ERISA holds the Code in check despite some diffrences between the COde and ERISA in certain matters.

You have to consider state law and regulations, if any, because state law is not pre-emppted and a government retirement plan has to be authorized by state law in some way. Not a specific answer and the task will vary form state to state and plan to plan. Don't expect a direct answer to your question, even if you find all the relevant state law.

If the participant could have taken a distribution rather than a loan, it might save the day, but I would expect some awkwardness with plan terms that don't quite fit.

None, as long as the change complies with regulations under section 411(d)(6), including 1.411(d)(4). I assume that the employer does not want to have the plan serve as an estate planning vehicle and does not care that the plan might more efficient than an IRA for managing an individual's retirement investments. I would also apply lump sum distribution provisions to required distributions rather than allow distributions of only minimum amounts.

While it is true that a plan can allow distributions to alternate payees before a participant is entitled to a distribution, the inquirer's interpretation of 414(p)(4) is incorrect. The recent airline pilots scam divorce decision took the position that determination of qualification is a mechanical process. If an order satisfies qualification requirements, then it is qualified and its terms must be followed. As I posted before, I don't see how an order can be disqualified for providing that a non-spouse alternate payee is to be paid immediately if the plan has been designed to allow a spouse alternate payee to be paid immediately. What QDRO requirement does the order fail? If the plan does not provide for spouse alternate payees to be paid immediately, then such an order would fail under 414(p)(3)(A), and that would be consistent with 414(p)(4). Without more detail and explanation, I see the cost rationale as smoke. Even if the rationale were facutally true, I don't think it matters for qualification. It may be an expense allocation issue, but qualification is another matter. The pity here is that the economics of QDROs means that a proponent will be discouraged from fighting an incorrect plan position. The Department of Labor might get interested in the matter. 42 USC 666 evidences a strong federal policy for collection of child support and I suspect that most non-spouse QDROs relate to child support. I am not saying that 42 USC 666 (or the state statutes enacted under the mandate) is authority that a plan is compelled to pay before the participant is entittled to payment.

First thought: What legitimate purpose or interest of the plan is served by such a policy? Given my inability to come up with a legitimate purpose or interest of the plan, my second thought is that absence of any statutory or regulatory authority specifically on the subject suggests that the policy it not permissible. I would look at section 414(p)(3)(A) and wonder how the order could fail to qualify if the plan allowed pre-termination/age 50 distributions to spouse alternate payees. Finally, I can imagine some illegitimate purposes that the policy would serve.

An IRS agent is likely to look at this as a disqualifying distribution rather than a good faith loan gone into default.

"If a participant comes to the plan sponsor (plan administrator) requesting a distribution, files the necessary paperwork, and receives the distribution, but the plan sponsor (plan administrator) later receives a QDRO notification, does the plan sponsor have any liability for allowing that distribution?" -Not unless the plan administrator has gone the extra distance to create unnecessary obligations and included them in QDRO procedures. "What if the plan sponsor routinely asks participants upon requesting a distribution whether they are married or not and the participant lies to them and says "no"?" -Same answer, but a plan administrator that asks the question without having a plan purpose other than QDRO concerns is on its way to creating unnecessary obligations. You start with the terms of the statute (both ERISA and the tax code) that speak only to what happens if a plan receives a domestic relations order. Then you disregard the completely unsupported (in fact, contradicted by a federal court decision)informal statements of the Department of Labor concerning what the plan administrator knows or should know about whether or not the plan might ever receive a domestic relations order. You probably will not find any authority that states the conclusion as directly as you might wish.

Rollover of loans is within the general direct rollover rules and a very practical acknowledged legal blind spot of the IRS. The IRS may not acknowledge the blind spot, but it has articulated its acceptance of direct rollovers of loans. The 401(k) plan has to be willing to distribute the loan in kind and the 403(b) loan must be willing to accept the loan. Neither of those two necessary elements are cumpulsory, and best practice is to have express plan terms. There are ancillary details that a receiving plan would like to think through and establish conditions before accepting direct rollovers of loans.

Generally no. If the request is in aid of submitting a claim (e.g. miscalculation of benefits), then the plan document should be given. Requests for plan documents can get tricky. Because of potential statutory penalties, the request should be refused only if it matters for some reason. The plan sponsor generally has nothing to do with providing copies of plan document to participants. That is a function of the plan administrator.

If the circumstances are not covered by plan terms, then a written interpretation or polciy should be adopted to describe handling. It would also be a good idea to have a description in the SPD or an SMM that is given to particpants in arrangements that provide for compensation that is not cash compensation. John might be put in a bind or might otherwise be unhappy about a short pay check. A more active approach would be direct contact in advance, with enough time for a change of election.

If there is an ability to pay the loan without compenstion from the employer during the leave, then the loan payments should not be suspended during the leave of absence. That will be the proof of the assertion.

The plan's written QDRO procedures should provide that the plan has no obligation to recognize anything, or take action with respect to anything, other than a domestic relations order. If the plan receives a domestic relations order, then the QDRO procedures should provide guidance about what to do. The Department of Labor's informal position about some vague obligation if the plan "knows" something about a domestic relations proceeding (past, present, or imminent) is not supported by law. If the plan has received the separation agreement, the plan must determine if it is a domestic relations order. If it is a domestic relations order, the the order should be processed in accordance with the QDRO procedures. If the plan adminstrator is in some dilemma becuase of inadequate QDRO procedures, this would be a propitious time to rectify.

The plan should have terms to the effect that the plan must determine that the loan is expected to be paid before making a loan. Usually that is an easy determination because the plan will require the loan to be paid through payroll deduction. The determination is not so easy when the employees is on leave and there is no pay to serive the loan debt. That could be the basis for a policy or a conclusion that a particant cannot take a loan while on leave.