QDROphile

I do not see anything in the definitions of party in interest or disqualifed person that says a participant is one by virtue of being a participant.

The difference between ERISA and the tax code is not about participants, it is about employees. Compare ERISA section 3(14)(H) and Code section 4975(e)(2)(H), so maybe the ASPPA piece is not so much an authority on this question. Also, ERISA says says that a participant who directs investment of the participant's account is not a fidiciary (for that reason); the Code says otherwise.

I agree that a plan may allocate expenses relating to a particular account to that account and perhaps should allocate that way. I am unaware of any authority that compels precise allocation to the source of the expense. In fact, many plans do not allocate administrative charges for QDROs to the account of the participant/alternate payee, and the employer does not necessarily cover the expense either. Is there authority to the effect that that QDRO expenses cannot be allocated as a general expense, and thus effectively be borne by all particpants?

Plan incurs $600 of legal or actuarial expense in interpreting and processing the order to determine qualification and the alternate payee's benefit. Must the plan charge the participant/alternate payee anything other than a prorata share of the $600 as a general administrative expense that is shared with all other accounts in the plan? Assume that all QDRO administrative expenses are treated the same. No participant/alternate payee is charged the entire $600 (or the actual expense, whatever it is). If the plan has a fixed fee of $500 for processing that is charged to the participant/alternate payee account, can the plan charge all accounts the additional $100 as a general administrative expense as described above?

How are you going to make the market? Who gets to sell and who gets to buy and at what price? Your question implies that participants make both buy and sell decisions.

"One thing that needs to be recognized is that plan must be made whole for value of services performed by TPA/attorneys in determining the QDRO valuation." Please elucidate. Are you saying that out-of-pocket expenses relating to QDRO administration cannot be included in the general expenses of plan administration and allocated across all accounts the same as, for example, auditor's fees?

Custody, liquidity, valuation, liquidation/distribution, possible prohibited transactions, UBTI (especially for an operating company), fiduciary issues because of the ERISA plan asset rules (for an investment vehicle). All of those concerns are manageable if considered and addressed. For example, the valuation concern may have been adequately addressed, at least for the present. Things change with these investments, especially if they are not successful. As a very general matter of prudence, an investment that is illiquid should not represent a very large portion of the plan assets.

Shame on whoever decided to get involved with ADP. It does not seem like such a smart, money-saving move now, does it? The plan is in for more unforeseen trouble in the future if the butterfly ever flaps its wings. Of couse there was no need to create a new plan. You might try to resolve the matter by addressing it as the documentation mistake that it was rather than a failure to file, as long as the problem is limited to the document formalities and did not adversely affect operations. One problem will be ADP. They will not be either helpful or accommodating if my several experiences with ADP hold true. Consider using the clean up of this mess as an opportunity to move to some other provider at the same time as part of the clean up.

This is a fiduciary issue. Who is the fiduciary? If the individual is the trustee with investment authority, what are you asking (or perhaps, why are you asking)? Does the individual need educaton about ERISA fiduciary standards to supplement his vast financial and investment knpowledge? The question about change to participant direction could be handled as a corporate function by plan amendment.

The written materials for the 9/7 program were delivered to registrants. There is a lag before the materials and program transcript are posted on the IRSS website.

Does the plan specify that the distribution must be in cash, or are in-kind distribution allowed? A loan rollover is an in-kind distribution. Sometimes you can finesse with the definition of eligible rollover distribution, which tends to be generic and the plan will expressly provide for direct rollovers of eligible rollover distributions. P.S. Or amend the plan.

In a public IRS telephone conference today on the subject of plan corrections the IRS made it very clear that its position is that the cure of the defect must be completed within the 5-year amortization limit to avoid taxation, and the 5-year clock starts at the time of the plan loan. The written materials are typically available on the IRS websie. The written materials state the IRS position, and the oral presentation removed any doubt about interpretation of the written material (i.e. "cure" means that all of the loan payments, as revised to correct missed payments, must be made within the original 5-year term.

Any election that offers the choice of cash or a contribution is a CODA. The amount elected as a contribution will be counted under the section 402(g) limit. Making it an all-or-nothing choice does not change the application of the rule.

An election to defer an amount from the profit sharing payment (instead of receiving the entire payment) will count against the inidvidual's section 402(g) elective deferral limit and the amount will be an annual addition under section 415.

"I'm still not sure that your use of the term "profit sharing plan" is correct. It sounds more like a bonus plan where people receive certain amounts and those amounts are taxable income. Am I correct?" Restart the conversation here. Don't get distracted by one-time election provisions. The original post created so much confusion that the responses have geneally been unhelpful. Provide details to describe the "profit sharing plan." It sounds to me like a bonus plan and you have a garden variety deferral question.

How has the DOL expressed its thought that investment education should be provided? All I remember is a preamble that very clearly stated that investment education was not required.

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.