QDROphile

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).

GMK described the distribution procedure that avoids the problems that you can have with #2. Under #2, the $50,000 is not really contributed to the plan. The plan is selling shares to the sponsor. The sale is OK, but to be exempt from the prohibited transaction proscription, the sale must close at the value of the stock at the time of the closing and most plans do not want to get a valuation opinion at the time of every distribution. The approach described by GMK allows the sale of the shares to the sponsor under the presumption that the most recent regular valuation is still valid. I don't think that the automatic buy-back arrangement is limited only to distributions to non-employees, so I invite GMK to elucidate. The authority for the arrangement is indirect, so some details are not settled.

Neither approach is necessarily preferable. The second can be particularly troublesome because of prohibited transaction issues. Are you interested in another way or are you somehow confined to the options you have suggested?

Use of earnings form the pooled assets distorts investment return allocation. Despite some earlier IRS authority to the contrary, some roviewers are currently taking a very strict approach about allocations. We never new how much distortion was permissible under the existing authority. I personally don't like the plan provision. It would never be any any of my plans. I doubt that anyone would get in trouble for disregarding it, esspecially if the ifduciary determines that it is contratry to ERISA or jeopardizes qualification.

If the arrangement is exempt from ERISA, it must still consider securities laws.

I think your statement about section 83 property is too limiting (see XTitan comment, but I did not confirm if it applied correctly to your facts). The deferral will have the effect of making the compensation based on phantom measures, such as phantom stock, but I do not think that affects what is awarded. Restricted stock can be awarded. The compliant deferral will mean that the stock that is awarded is not delivered until later in accordance with the deferral (or never deliverd if the interest is forfeited). We may be saying mostly the same thing, but I split hairs about the labels for different legal interests. For example, there is a big difference between an award (representing a legal right) and delivery (affecting with can be done with the legal right). Tax effects depend on such nuances. As an aside, in my experience the individual does not get a stock certificate representing restricted stock until the restiction lapses. In that sense, restricted stock is effectively phantom stock with respect to the owner even without deferral of compensation.

Have we lost the deadline for electing the deferral of the 401(k) part of the contribution or does that not matter to this discussion? I think the discussion also assumes that the LLC has not elected to be taxed as a corporation.

Deferred compensation is always phantom, whether or not it is stock. Deferred cash is phantom cash; the participant simply has a contractual right If it helps you to picture it, then put the the restricted stock certificate in a grantor trust. The deferral election defers the receipt of the stock (the compensation) past the award date. Your comment about receipt of restricted stock begs the question. I am confused by your comment about a section 83(b) election. If one wants further deferral, one cannot expect to thwart the deferral rules and accelerate inclusion in income or transform the "investment" gain into capital gain, You use either (i) concepts of deferral and section 409A, or (ii) section 83. Deferral under section 409A and risk of forfeiture can interact, but you can't pick and choose your phenomena. You have to coordinate and be coherent.

The hardship amount should be sent to escrow with appropriate instructions, including self-serving instructions that the amout is to be applied to the purchase. The escrow also provides a basis for taking the funds back into the plan if the deal collapses, and this deal looks uncertain.

You can defer restricted stock the same as any other compensation. In a simple scenario, suppose you have a stock bonus program. The bonuses are restricted stock and the stock vests in three years if the individual is still employed on the vesting date. If you have a deferred compensation arrangement that covers the stock bonus program, a particpant can elect to defer the the bonus. The election has to be compliant with sectioon 409A, e.g in the year before the year that is the year services are performed relating to the bonus. Suppose the participant elects to defer until the later of ten years or termintion of employment. The stock is credited to the deferrd compensation account when the bonus is declared. The phantom stock vests in three years. No income, but the value of the stock is included in FICA wages. The compensation for income tax purposes is deferred until the payment date specified under the deferred compensation plan. At the payment date, shares are issued and delivered to the participant and the value at that time is included in taxable income.