QDROphile

Not so fast. Actions must also comply with plan document terms. While it is possible under the law to make up premiums with separate after tax payments, the plan may be more restrictive. Many plans do not allow after-tax payment at all. Now that you know more about your administrative needs, you should amend the plan to accommodate them.

I disagree with the tax-return due date and none of the material in the posts cite any authority to the contrary. Elections must be made before an amount is currently available. The special rule for self employed individuals is in Treas. Reg. section 1.401(k)-1(a)(6). The deadline is the last day of the partnership taxable year for partners and the last day of the calendar year for sole proprietors.

Where do you get the later deferral deadline for self employed persons?

"Interesting, that advisors typically know what they want to hear and will continue to push the issue. Remember, that doesn't make them "bad people", but they do get a lot of mis-information." It does make them bad advisors, and that should be taken into account in retaining them. it also shuld be taken into account for who should be the one to justify and support a position taken when the validity is questioned.

Ask the genius who created the situation in the first place. The genius was probably counting another IRA or qualified plan of the owner that had lots of liquid assets that could be rolled over from time to time to meet the predictable periodic liquidity lneeds of the IRA. Or the genius knew of an unrelated person who was willing to lease the raw land for use as a wildlife refuge or for future oil exploration or as a firing range.

The plan document should address this issue. As you say, it happens all the time, so a competent document would deal with it. One would then look to the determinination letter for some comfort that the plan's disposition is in accordance with section 409(o).

Although overshadowed by section 409A, constructive receipt and economic benefit concepts still apply. Is the ability to use the deferred compensation to obtain a loan an economic benefit that would cause some amount to be taxable? I agree with jpod tha that the practicalities of the situation make it unlikely.

The health FSA is insurance. It is odd insurance because the premium is equal to the benefit limit. You don't complain under your regular insurance benefit if you are lucky enough not to have claims for the year that exceed your premium for the year. Also, if you maxed out on claims early in the year and then terminated employement, the insurance company (the employer) would have a loss that would not be covered by the remaining premiums for the year because those premiums would not be collected. Insurance is all about risk. The FSA is not a bank account.

Compliance with 401(a)(9) is all that is required. An extreme example would be a plan that allows lump sum distributions only. Come required distribution time, the entire balance is distributed. The other extreme is automatic distribution of only the amount required by law at the time. The plan could allow election of an in-service distribution form of benefit as long as the payments covered at least the required amounts at the required times.

As long as the employee is past normal retirement age.

Correct. The distribution is not a required distribution. So the first question is what plan provision allowed the amount to be distributed in 2010? That provision should also determine if an amount must or may be distributed in 2011. If the only provision for in-service distributions is for MRDs, then the 2010 distribution is improper.

The only reason for the circumstances are plan provisions that go beyond the legal requirements and provided for the distribution for 2010. Consult the plan for guidance about the current proposition. While you are at it, you might want to reconsider if the plan actually allowed or required the distribution for 2010.

The membership resembles insurance, and an FSA cannot buy insurance. Do you have some other angle?

"Only 5 employees will be on the company plan; others are covered by their spouses plans - they are compensated for what they pay to be covered that way." Add to your list of questions whether or not the employer has a section 125 plan with respect to the health benefits. The employees appear to have a choice between health coverage from the employer or cash (the amount the employer increases compensation to cover the incremental cost for benefits under the spouse's plan). Since on of the requirements of a section 125 plan is a written plan document, there may be trouble. But the answer to your articulated question could be affected by whether or not there is a section 125 that covers health beneits because section 125 plans have discrimination rules. Subject to future changes under health care reform, there are no tax discrimination rules relating to insured health benefits (unless they sneak in indirerctly because the health plan is under a section 125 plan). An employer can cover all or some of the premium cost for an employee. That is simply a matter of compensation. No comment on individual rating.

You appear to be asking a state law question about division of proprtery in a divorce. There appears to be no qualifed plan with any assets to be divided by a QDRO. There appears to be an IRA and you allude to other amounts at issue that are not IRA assets. Division of IRA benefits does not involve qualified domestic relations orders, but IRA assets may be awarded by court order. The trail leads back to what the state court is willing to order. QDRO law has nothing to do with the question. If you have any hope for a useful response, you might identify the state or at least confirm that community propery law applies, or not.

Are pay periods monthly? If they are, the plan is stretching limits and not following best practices, but it is not decidedly wrong. The election is made before the taxable benefit (cash) is available.

The important word is "amend." Certain in-service distribution features are protected benefits and can be removed only prospectively. Prospectively means with respect to contributions and related earnings after the amendment. Pre-amendment amounts and related earnings cannot be compromised. If there are no in-service distribution terms in the plan, you can add in-servce distribution terms limited to rollovers.

Check the Department of Labor guidance about acceptable ways to allocate expenses. I don't think you are going to be able to exempt the rollover amount from all charges. You may be able to have the employer pay the rollover accounts' shares of charges that are allocated ito accounts in a reasonable way.

This may be pursuant to a law enacted under 42 USC 666(b). However, I recall that such orders are enforceable only against retirement benefits that are in pay status (don't trust me on this point). The order might be issued under the state's domestic relations law. It would be processed for qualification as any other order. It is a common misconception that domestic relations orders are issued only by courts.

You are responsible for the consequences of the distribution. If you wish to defer distribution, you may yet be able to roll the amount over to an IRA. You have 60 days from receipt to do so. However, you need to educate yourself about the rollover rules because it is likely that the amount you received is not 100% of the distribution, and you will owe taxes and possibly penalties on the amount that is not rolled over. The plan probably withheld 20% of the distribution and forwarded the amount to the IRS to be applied against your tax liability. See IRS Publications 575 and 590, available on line at the IRS website. It appears that the plan did not follow the correct procedures for distribution. You should have received advance notice, information about rollovers, and the ability to elect a direct rollover (saving you the 20% problem) before the distribution was dumped on you. The irresponsiblity of the employer in the first plan suggests that you have a tough slog ahead of you to try to get the plan/employer to recitfy the failure to follow correct procedures. There is the possibility that the plan behaved properly and you have been disregarding communications and that you missed your opportunity to elect a direct rollver.

I second the concerns of MSN. The fiduciary responsible for investments must evaluate what options are available. If the fiduciary designates in investment options and would have to designate insurance as an option, the deisgnation is a very serious concern and substantive evaluation should be conducted to make sure that the option is prudent. It is less a concern if the fiduciary does not designate investment options because the plan (by design or fiduciary decision) has opened the plan to any legal investment. The fiduciary would have very little responsibility for the investment chosen by a particpant. The fiduciary might have to worry about the relationship of the agent pushing the policies.

Examine your assumption that they have to lose benefits. In all likelihood that is a policy decison.

If the fiduciary has determined that the fund is no longer a reasonable investment option, the option should be removed. If a new fund is necessary to provide a reasonable menu, then a new fund should be added. Halfway measures are generally not a good idea. The compromise undercuts the fiduciary's decision and suggests that the fiduciary did not do a proper job.

The record keeper in not in charge unless the record keeper is a fiduciary with respect to the matter. Show some spine.

How nice for the good doctor's personal interest. Absolutely prohibited and the only way is an individual exemption.