QDROphile

You have given us enough information only to provide a standby answer: Physician investment idea=prohibited transaction.

Making a lot of assumptions about what an equity membership means: To the extent the membership has any personal privileges or benefits, such as use of facilities, no plan participant or fiduciary can use them. The "member" will have to sit it out and do nothing while waiting to sell the membership. The need to enforce the restriction might be a stopper -- how will that be done and who will do it? Also, I suspect that there will be periodic or extraordinary fees and expenses that must be paid from plan asets from time to time and no income generation from the asset in the interim. I am not even touching on liquidity considerations. Handling such an investment properly is just so impractical that the investment is effectively not feasible, and no fiduciary should allow it, even in a section 404© environment. When inquiries come in about investment in vacation property, the discovery of restrictions on personal use is usually enough to put an end to the idea.

I vote against as a policy.

How is this not a simply a discretionary match? It sucks the same as any other discretionary match.

There are not enough details about the terms of the QDRO and the benefit payments to conclude if 6(b) or 6© applies. I do not know about reporting details either way.

Not a record.

If the plan has terms relating to Treas. Reg. section 1.403(b)-8(b) and the contributions violated plan terms or the regulation, you might be in a situation that would cause you to look to EPCRS.

The safe harbor terms of Treas. Reg. section 1.401(k)-1(d)(3)(iv)(E) require distributions from all employer plans, including ESOP dividends. The 401(k) regulations do not enable distribution of ESOP dividends. The participant must take them if they are available. The "non safe harbor" standard in Treas. Reg. section 1.401(k)-1(d)(3)(iv)(B) also covers ESOP dividends to the extent available because it covers all resources. ESOP dividends are not expressly mentioned.

One might be influenced by the terms of the termination amendment. If there are no applicable provisions, and one the thinks that the amendment is effective to cut off elective deferrals as of the specified date, how would one justify contributions of nonelective contributions? I don't think mere delivery of contributions, e.g. matching contributions, after the specified date is a problem if the contributions are provided for before the specified date.

The 415 limit issue is rational if the benefits are significant. By limiting the electives, that allows more employer contribution. But I suspect only a few people would have a 415 limit issue, and that would be better handled by counseling than an across the board limit.

Possible answers: 1. Section 415 limits. 2. Mistaken and obsolete carry over concept from taxable employer deduction limit.

Expenses incurred in a plan year cannot be covered by amounts deferred in a subsequent plan year, subject to some very limited exceptions. See Prop. Treas. Reg. section 1.125-5(a)(1), although you will have to get acquainted with the specialized terms used in the regulation to get the meaning relevant to your situation.

See Treas. Reg. section 1.409(a)(9)-8 Q&A-6 and Q&A-7

Assuming no sham termination issues and assuming that plan terms do not speak to the situation, I would treat the second distribution as a tail to the lump sum distribution and not a separate distribution. The distribution occurred based on termination and is not an in-service distribution. The rehire is irrelevant. The distribution was set and locked before rehire. A good plan document will have provisions about tail distributions, but good plan doucments are obsolete. Sniff.

Yes, subject to a two part legal analysis: 1. So what? 2. Who cares? The response is expressed in a flip way, but the substance is serious.

Good one! You may have to hesitate a moment in that location.

A better riddle: What is the difference between a cat and a comma? Hint: "tail" is not involved in the answer unless you come up with an unexpected answer. Sorry, I am out of match riddles/jokes that are fit for public consumption.

Prohibited transactions.

Do the account owners or their family members have any other interest in the franchise, such as personal share ownership, or do they participate in or have any other relationship with the the franchise's business? The combination of retirement plan and investement in a nonpublic franchise is highly suspect.

Old riddle. A cat lights on its feet. A match lights on its head.

I have always designed forfeitures to to offset contributions. Under that approach, you have correspondence between deferral and match. See Treas. Reg. section 1.401(m)-1(a)(2)©. I think that says you have to have to allocate on the basis of employee contributions, deferrals or matching contributions. A participant with no contirubutions or deferrals will not have matching contributions either, so no allocation of forfeitures would be a matching contribution. Q: What is the difference between a cat and a match?

Is nothing sacred?

Because of the exclusive benefit rules of section 401(a) of the tax code and of section 404(a)(1)(A) of ERISA, the plan terms should not have any provision that allows plan assets to be returned to the employer, except in limited specified circumstances, and the plan terms may have stronger prohibition language. If funds have been delivered to the trust, it is not a matter of finding authority that forbids plan assets from reverting to the employer, it is a matter of finding authority that allows assets to be delivered to the employer. The employer made a contribution. A defined contributin plan will have terms to determine how contributins are allocated. That will dispose of the amounts contributed unless the plan has other terms to cover some other disposition of the funds.

You get what you pay for with prototypes, including faith that everything works out right despite documents making no sense to a literate person and unconsciousness of the representatives of the provider. Congratulations for even reading something other than the adoption agreement.

Correction of mistakes is lore. I think the lore on this type of mistake is that is is not correctable unless the the plan limited the election to $2500, so it was also a mistake of the plan rather than a mistake of the individual's understanding of tax law. Certain types of mistake by an individual are correctable, such as an impossibility. An example would be an election for childcare when the individual had no children (don't start arguing about the pregnancy anticipatory elections). Other facts and conditions can be important, even for a type of erro that can be corrected. Lore is hard to pin down, but some of it rests on informal IRS represenative comments. I am not aware of any particular documented comment on your situation.