QDROphile

If the annuities were individual purchases through a brokerage window, what is the need for fee disclosure? Are you asking beyond the plan's perspective?

Matters of default are covered by plan terms and loan document terms, which need not follow the outer limits of what the law allows. I assume that the question arises becuse the plan terms and loan documents do not provide adequate guidinance. But then you should be asking the question, "how do we apply the plan terms?" to the question, not "what is the law?" You may get to "what is the law?" if that is where the plan terms send you or leave you. Others can't help if you are still at the stage of asking about document terms unless you report what the document says.

457(b) plans for governement employers are not subject to claims of creditors, which is the "insecurity" for 457(b) plan of non-governmental employers. For all governmental plans, the government must have stautory authority to maintain the plan.

Nothing about section 403(b) prevents assets from being held in trust. A 403(b) plan enjoys exemptions from the usual ERISA trust requirements if the annuity contract or custodial account requirments are satisfied. For 401(a) plans funded through group anuity contracts it is not so unusual to have the contract held in a trust.

Depends on what "spouse" is used for under the plan. For eample, a requirement to get spouse consent should not be of any concern to the tax requirements.

One reason the practice is controversial is that it is difficult to design or reconcile consistent with legal requirements for qualified plans, inclusding ESOPs, especially S corporation ESOPs. To mix metaphors, it is common to hold one's nose to avoid seeing that the emperor has no clothes.

Dependent care can be funded though a cafeteria plan under section 125 and usually is. If the dependent care amount is elective and reduces the W-2 pay, it is run through a cafeteria plan (if done properly). The reduction would be considered a reduction under section 125.

ERISA section 408(b)(1) is the usual exemption for plan loans to parties in interest and it is unlikely that the loan met the requirements. That may be where the "loan guidelines for the participant himself" suggestion comes from. A loan to the owner/participant could fit under the exemption, but the loan to a nonparticpant would not have the same required terms and would not follow the "loan guidelines" for a participant. Assuming that the owner is a fiduciary, one would have to get around the ERISA section 406(b) proscriptions. The loan is a prohibited transaction. The question becomes one of finding an exemption.

While I love simple and unambiguous answers, I also love imagination. Could you bring yourself to believe that utility shut-off is constructive eviction? A plan adminisrator's job is difficult enough and the simple negative will keep away from trouble.

Peter, I agree with your conclusion but if the conclusion is correct I also note the rather uninformed and unintelligent inconsistent references in the regulation, such as to the "issuer" of the investment alternative. Who is the "issuer" of a fiduciary-managed pooled investment fund? The DOL evidently gets a lot of its understanding of retirement plan investment management from Money magazine, and then the rest of us have to make sense of the shallow regulations in a more diverse and complex world.

Look at Rev. Ruls. 2002-22 and 2004-60.

See section 403(b)(12)(A)(i) and reg section 1.403(b)-5. The answer to you question is negative. The section 403(b) regs do not themselves provide an answer. You have to look to the relevant section 401 rules.

Mojo The reference to PTE 80-26 was in support of your point. One of the principles in PTE 80-26 is that a reimbursement arrangement should be established in advance, includng relevant terms such as time.

You might be interested in PTE 80-26.

I have never seen an E&O insurance policy that allowed third parties to make a claim on the policy. I think what you mean is that a claim has to be made against the broker. The broker then goes to the insurer to claim coverage (which may include defense) so that any award against the broker is paid by the insurer rather than the broker. Asking the broker how to go about filing a claim with the broker's insurance carrier does not make sense.

This is a matter of plan terms and corporate governance, and is very fact-dependant. You cannot presume invalidity. If you want a relatively certain answer you will probably have to get an evaluation by a competent lawyer.

Perhaps you would point out that it compromises the benefit considerably if it is a practical imposition. I think most peple like regularity in their take-home pay and may not particpate to the fullest if they have to accommodate material variation in cash flow. I don't think it is a legal problem if it is adequately described and administered. It will be something that will tick off some employee at some time who does not understnad the deal. For some others, they won't take the deal or they will reduce amounts.

The law says to follow plan terms unless the plan terms are contrary to the law.

You have not given enough information about the payment terms for analysis and the assurance that the cap would comply in a new plan does not cover the omission.

There is not a lot of published authority about the rule. I think the rule is about timing of initial eligibility. If initial eligibility for any plan is the same date for both plans, the deadline for the election under each plan is the same date. An election is not required to apply to all plans and the election is not limited to an election not to participate.

It can be done only because the IRS says it can be done and the tax risk is the only practical concern. If the IRS is not going to challenge the transaction, no one else should be too concerned that it really cannot be done because the loan legally disappears in the process. A loan can be transferred, but transfers are not favored because they import protected benefits. I would be a bit more concerned with the alternative that does not hide behind some of the artificialities of the direct rollover rules that the IRS has expressly blessed. Under the alternative approach, the loan offset is a distribution of the loan to the participant (no direct rollover fictions) and the loan is extiguished by merger.

If the plan uses the "other resources" standard, the "other resources" standard applicable to hardship distributions includes ability to borrow from commercial lenders. If that standard is applied, the individul must be unable to get a mortgage loan on reasonable terms as a condition to borrowing from the plan (compare to: has not yet applied for a mortgage loan). However, you have to figure out if the hardship standards of the plan with respect to loans requires use of the statutory standard because the statute does not apply to loans. I am sure that you will find thoughtful, complete, and very well drafted provisions in the plan that explain what was intended by application of the hardship standards.

Anything is possible with agents. That is a major why we got new 403(b) regulations and can't have ERISA exempt 403(b) plans any more, despite the embarrassing Department of Labor field assistance bulletin to the contrary. The restrictions on in-service distributions before age 59 1/2 are in section 403(b) and the 403(b) regulations. The applicable exceptions are found in section 403(b) or might be found in other applicable law with reference to 403(b) rules. Section 72 does not provide any exceptions.

I agree with ESOP Guy about the practicalities. I am skeptical of arrangements that involve transfers, except diversification, and diversification would usually be better as a distribution and direct rollover rather than a transfer. Some of the consideration regarding distributions depends on one's conclusion about whether a next-year distribution provision can be amended to provide instead for distribution after five years following termination.

In the second scenario the transferred cash would have to remain subject to certain ESOP terms, such as the right to receive employer securities (unless an exemption applies). The cash might be transferred because the other plan is better suited for investment of amounts that are not employer securities pending transfer back to the ESOP for investment in employer securities in a future rebalancing or distribution in accordance with ESOP terms.