QDROphile

Proposed regulation 1.409A-4 has been issued as guidance for calculating taxes under 409A. One can rely on the regulations until further notice. The calculation of the additional interest tax is a bit of a mind bender.

Not if the proposed implication is that one is an ERISA plan because of a match and one is not an ERISA Plan. If you are not trying to divide along the ERISA lines, then it really does not matter if there are one or two plans. Either way the terms of the plan(s) will have to say which provider can receive contributions and how to coordinate transfers, loans, hardship withdrals and conttibution limits among the multiple providers. Trying to manage and navigate multiple plans just adds a layer of formal complexity that seems to benefit no one. I am not touching the subject of having more than one plan to avoid audit requirements.

Sorry for the statement that was so dense that it was opaque. Once a domestic relations order is received by the plan, the plan must protect the part of the benefit that would belong to the alternate payee if the domestic relations order is eventually determined to be qualified. Even if the order is determined not to be qualified, the alternate payee must be given a reasonable time to remedy the defect and the benefit must be protected in the mean time. It is often difficult to determine how much of the benefit should be protected. Subject to provisions in the written QDRO procedures to the contrary, if a domestic relations order has not been delivered to the plan, a participant's rights should not be restricted, even if the plan suspects that a domestic relations order is more or less on the way. This is the circumstance in which the Department of Labor position is at odds with the language of the statute and the court decision on the subject. If the plan has a domestic relations order in hand when the participant would have benefits commence, the Department of Labor guidance is not wrong about protecting the benefit for the would-be alternate payee pending determination of qualification. How that actually works under a pension plan at or after retirement age is an interesting question and the DOL is unhelpful.

I don't believe you can have a non-ERISA 403(b) plan. What you can have is an ERISA 403(b) plan that the Department of Labor will not go after as an ERISA plan because the Departent of Labor is so caught up in its prevarications that it cannot take a real enforcement postion. Before the 2007 IRS regulations and the related DOL prevarications, you would have been told that if the employer matches 403(b) elective deferrals, the 403(b) plan is an ERISA plan, even if the match goes to a 401(a) plan. I don't think any developments have changed that conclusion.

Sorry, never trust the Department of Labor on a QDRO question. Schoonmaker v. Employees Savings Plan of Amoco Corp. It would help if the Department of Labor read the statute, so don't make the same mistake. Fortunately, following the Department of Labor's position probably won't get you in trouble because the participant is unlikely to be harmed by a delay in distribution and asserting a breach of fiduciary duty will not be worth the trouble. The fiduciary is in another sort of trouble if the answer is not in the writtten QDRO procedures and you are in trouble if you don't at least see what the QDRO procedures say.

QDROs are a plan obligation, not an employer obligation. Termination of employment is irrelevant, but it does make some timing issues more sensitive and difficult if the participant has the right to take a distribution in the middle of the QDRO processing.

Sophisticated advice is needed and judgments (economic and other) will be involved in a process that will involve dialogue. You will not get adequate assistance here unless what you get is a good referral.

First you have to understand what your health plan requires. Does the employer or employee choose the insurance? Are you allowed to exclude on the basis of other coverage, or are the employees allowed to opt out? Does the employer pay the full cost of coverage, or is the $462 a fixed amount that is a portion of a greater cost that the employer pays? The employer must follow the terms of the plan. The plan is more than the insurance policy and will include how the premiums are paid. It is possible the the funding is is under a cafeteria plan (section 125 plan), so the terms of that plan must be considered. Your post does not suggest that you have a cafeteria plan. If the employer is not required to cover the two employees, you still have to consider employment policy. Health benefits are part of compensation. What is the appropriate compensation for the two employees? If the employer is not compensating by providing health coverage, should that compensation be made up to the employees in some amount in some other way?

Not advisable for elective contributions because of the securities law complications (unless the company is a public company). For nonelective contributions, very serious fiduciary concerns relating to investment of account assets. I have seen it done, but it gives me the chills. At very least, one should have an independent fiduciary and that independent fiduciary will hire an advisor and it won't be cheap.

The plan termination is the distributable event. Merger changes the controlled group so the successor company's plan is not a successor plan. That is the theory, anyway. There is one important timing element that comes out of that logic. Can you guess? If you guess correctly, then you might have to grapple with the meanng of "plan termination" and how it means different things for different purposes.

I agree that in a "keep all the money" environment, the five year rule would be the wrong choice. Providing a familiar home for widows and orphans is also a nice benefit.

Imposing the five year distribution rule and not providing otherwise for a surviving spouse does not mean the document is poorly written. Plan design involves many policy choices, even in these days when so many cannot think beyond the prototype. Why should an employer provide a vehicle for retirement payments to a spouse or other beneficiary, especially when rollover to an IRA allows continuation of the deferral of income and flexibility in payment? I don't think there is a single answer.

You can start a new 457(f) arrangement prospectively. You can't do anything about the amount included because of the vesting in year 10. I would not try terms that provide for elective deferrals.

I would be inclined to correct the other direction and maintain the Roth IRA. A cooperative local institution would be helpful.

I am not informed on this subject, but on general principles, restatement is purely formal. The IRS wants a restatement for convenience of review for a determination letter, but there is no legal requirement for a restatement just as there is no requirement for a determination letter. A series of timely amendments complies with the law. To reconcile ERISAtoolkit's commment, I would agree that the IRS amendments that were adopted by most plane as snap on interim good faith amendments cannot serve as final amendments -- a plan would have to adopt subsequent amendments that integrated with plan terms and style. It seems silly not to restate the document to clean it up and make it consistent, but a patchwork of appropriate amendments could be compliant. That leads to the conclusion that the nonamender program is for a plan that failed to make some proper and timely amendment, including amendment of the interim good faith snap-on amendments. The required amendments do not have to be expressed as a restatement, although a "restatement" is required for a determination letter application. That "restatement" is another subject. If the plan truly was amended on time and with passable language for each of the required amendments, the plan simply appears to have missed its opportunity to get a determination letter within the time required to take advantage of remedial amendment deadlines based on the cycle filings and retroactive amendments in response to IRS views about sufficiency of language. If you want to use the nonamender program, I think you have to identify some way in which some plan term does not make the grade. You cannot assert that the plan meets all formal requirements and also be a nonamender. Failure to express the amendments as a restatement is not a formal failure.

That is what I suggested in the first place. But you are in a postion of failing to "bill" and it will be interesting to see if the employee does not cooperate with bailing out the employer. You have been advised by your lawyer. My only objection to the advice is the bad analogy to a 401(k) plan. Lawyers sometimes just don't know when to shut up.

This is a state law and procedure question.

You might try to look a bit deeper into the principles. This is employer provided health insurance, it has a premium, it has a policy limit that happens to be equal to the premium if the premium is paid for the entire coverage period. The risk shifting should be a clue about the insurance element. Contrrast a dependent care FSA.

Why do Fidelity and Schwab do paperless loans? Why does the Fidelity system fail to allow compliance with QDRO rules? The asnwer about rollovers is that the risk is low, enforcement is lax or nonexistant, and it is the fiduciary, not the service provider, that is responsible for the mimimal level of inquiry about rollover eligiblity. A spineless fiduciary gets what the vendor prefers. You should look at the IRS guidance about due diligence to decide your policies.

I agree with your ERISA attroney's conclusion, but not the reasoning. The employer failed to collect the premium timely through its own fault and is choosing to provide the coverage without remedial efforts. That is a provider prerogative. Dn't expect the same considertion from the insurance carrier.

Might be better to work out the make-up schedule with the employee rather than unilaterally adjustig payroll.

Plans are required to operate in accordance with their terms. Plans that cover the self employed as well as employees often have special terms to take advantage of the special rules for self employment income, especially the ability of the self employed to elect before December 31 with respect to all income. Without special terms in the plan, special treatment of the self employed is not allowed.

Treasury regulation section 1.72(p)-1, Q&A (9).

If the plan does not enjoy ERISA protection, state law might limit creditor rights. If you are looking for a referral, it would help to know the location (state, at least). This is not the best forum for referrals.

No agreement on an employee not being a party in interest. ERISA 3(14) (H). An employee is not a disqualified person, without more. IRC 4975(e) (H).