QDROphile

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.

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.