QDROphile

"Physicians and other professionals have a greater leeway from IRS to be treated as ICs as compared to other workers." While I don't completerly disagree with the statement, I will observe that physicians are legendary for their abuse and disregard of the law. This situation has that smell about it. A relevant IRS ruling on sham terminations involved a dentist. Close enough.

Frankly, I suggest that you involve legal counsel. The issue is not about "less formal." The issue is about who had authority with respect to adoption of the plan, what they did, and when. You are going to have be much more specific about what happened to "set up" and document the plan and the trust, and what was communicated to management and employees. You are going to have to look at how the employer is organized and the role and practices of the board and the officers and other agents in the employer's operations and employee compensation, including what the articles, bylaws and formal actions and policies say. Finally, someone has to sort out what happened and apply the correct context and terminology if you expect to convince the IRS. There is no room for more uncertaintly or confusion.

This is a matter of corporate governance, which typically neither the IRS nor HR management understand. If formal action were taken before the deferrals, including documentation, there is a very good chance that the plan was adopted with sufficient formality to meet requirements. While it is very clean and convenient to have board of director action that directly adopts the plan document, that is not the only way to adopt a plan. The IRS can be convinced of earlier adoption under appropriate circumstances with an intelligent explanation. Or the IRS can be beaten under the appropriate circumstances if the IRS limits its consideration to board action. It also appears that the employer did not have any appreciation for corporate governance and created a mess in the conflicting signals it created in the process.

Plan terms issue. Most 403(b) providers like money any way they can get it.

How would a judge be involved post-QDRO? A QDRO is an order issued by the court and your post says that the court approved your QDRO. Where do "sides" come into the picture? The issuance of the order by the court disposes of the issues covered by the order as far as the court is concerned.

I don't know what you mean by "rule of law" but the plan will give effect to the QDRO if it determines that the terms prevail over the Judgment, which is also a domestic relations order. If the Judgment is never submitted to the plan there will be no issue with the plan.

What about FICA?

1. If the company simply reduces the employee's base rate of pay to recoup the overpayment This would be illegal in most states.

If your only tool is a hammer, every problem looks like a nail.

The employer wants to cut wages and increase the employer contribution for medical benefits. Why does the employer want to dress it up differently, in a way that has an air of wrongness about it?

There are so many misconceptions implicit in your post that I am moved to suggest getting competent legal advice about what is going on.

Wow, what a helpful service provider, who was hired to be the agent of the plan administrator for purposes of compliance. The administrator is essentially telling the DOL that it complied by hiring the service provider, a presumably professional organization. A competent service provider would then offer something by way of an explanation that could be given to the DOL, such as a protocol and forms. "We don't have to" is really an insulting and unprofessional answer to a client. The DOL is looking for evidence of compliance. Something less than perfect assurance or best practices should be acceptable, and the service provider should be scrambling to come up with the best possible response. There are court decisions that discuss evidence of COBRA notices.

I would love know the back story. Did some fat cat wake up early? No comment on safe harbor plan, but other design can have amendments to matching contributions Other legal requirements must be respected. Section 401(a) (4) prohibits amendments that benefit only HCEs, but a true up could benefit an unusual nonHCE. You might check the section 401(a) (17) rules relating to partial years, but I suspect the amendment for a true-up will not have a problem because the point is to apply the match to the entire year.

I think GMK's position is more tenable. The "no marginal cost" approach is aggressive.

Ask the questiion another way. Will an ERISA fiduciary refuse to pay a benefit if a participant refuses to open a bank account for the fund transfer? Will a federal district court judge uphold the fiduciary's refusal to pay? Or ask the practical question. Will a particpant who wants a distribution make a fuss or just capitulate?

If what you say is true, the plan sucks. Take it up with the person responsible for plan terms and the fiduciary repsonsible for interpreting the plan. But read very carefully. It is very unlikely that the plan requires a regular distribution and an additional amount relating to the 401(a) (9) required distribution. The regular distribution for the year probably covers the required distribution and part is not rollable. It may help to keep in mind that the required distribution provision in a plan are often mindlessly drafted to conform to the statutoty requirements and thrown into the plan separately withot integration with the regular distribution provisions, subject to some hard-to-understand qualifying language about how the required distribution provisions provide only a minimum floor for distributions. ESOPs in particular are not drafted to implement separately the required distribution amounts.

It can be done. It is very difficult to navigate. Even under the best circumstances there is some legal uncertainty I would not do business with a promoter who did not up front emphasize (1) the limited ability and the difficulty of pulling it off legally, (2) the very high probability that business failure would wipe out retirement savings as well as current assets and income source, and (3) the heightened IRS scrutiny and animosity with respect to such arrangements. I would not do business with a promoter who who uses "it's" as a possessive. I see only bad signs at the website.

I second Bird's comments. It sounds like contributions an alloocations have been set. They are not set by individual elecltion, and they canot be undone by particpant election. If one is cynical enough (and these plan designs are cynical if one can describe them in terms of individual elections), one can say that the process by which the employer sets the contribution and allocation takes into account the total compensation of each participant and sets the mix. An employee does not fund the contribution. The contribution for the employee may have the effect of reducing the employee's current compensation in the mix of current/deferred compensation in package for the year. Once contributions are set and then earned under the eligibility and particpation terms (e.g. 1000 hours of service) the employer is bound to make the specified contribution. It is an employer obligation to make the contribution. I hope that this sort of conversation gets employers in trouble if they engage in this sort of abuse. But, the IRS seems to have abandoned any pretense of stemming the abuse.

If you have separate accounting, then why can't you give the alternate payee access to the separate alternate payee account -- at least the account balance? If the plan provides for participant direction of accounts, it could be dangerous to maintain participant control of the assets that are associated with the alternate payee's interest. Segregation is beneficial to the plan to avoid the obvious ugliness that can come out of the participant affecting the alternate payee's interest.

See masteff's response. If the plan does not establish the alternate payee's interest as a separate account or subaccount, please explain why. Apart from the advantages of segregation, you can see one the disadvantage of not segregating in your situation. If the alternate payee has the right to determine when to take a distribution, it is reasonable for the alternate payee to be able to determine the alternate payee's balance form time to time. If the plan does not segregate, the alternate payee can't figure the alternate payee's interest. Even if the alternate payee could, the plan cannot provide a view on the alternate payee's interest if it means revealing the particpant's interest. The plan might be obligated to provide a calculation of the Alternate payee's benefit on request, and the plan does not want to perform the calculations over and over again. Segregation is possible even in annually valued plan. The alternate payee won't get the picture on her balance that she has in her mind (which is probably based on daliy valuation, but that is par for the course for everyone in annually valued plans).

Every field needs a fielder, except when you pull the goalie.

1. No alternate payee until there is a QDRO -- or -- what do you mean by working on a QDRO? 2. What strange plan design/administration do you have that would cause your suspicion to make any sense? 3. The answer is negative but one has to get through so many negatives to even get to the question that the question might be in another universe in which the answer might be positive. 4. The Department of Labor might have a view on the subject, but the view is probably wrong.

I agee with Bird that the waiver may not have been a waiver described in the 401(k) regualtions and the outcome could be different if not. If not, then the original waiver may have been problematic, but that is a different matter.

Division of an IRA is not subject to section 414(p). IRAs can be divided in connection with dissolution of marriage. Federal law does not prescribe any allocation of an IRA balance between the owner and the former spouse. I think it preferable (and maybe necessary) to award a former spouse a single sum. You can arrive at the amount based on whatever theory you like, assuming you can do the math to arrive at the single sum and either get the parties or the judge to agree.

Fair enough. Then I would say that the amendment that produced the current plan document is not something that can change the election. The rule is not "irrevocable unless the plan is amended to allow a different election." The amendment has to be read in a way that allows compliance, or suffer the consequences of violation. The rehired employee is not making an election under the amended (prototype) plan terms. The original election is still in effect in accordance with its irrevocable terms.