QDROphile

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.

If the original election was a one-time irrevocable election within the meaning of the 401(k) regulation, what about "one-time" and "irrevocable" is ambiguous, especially in combination?

A plan disregards any election of COBRA at its peril, even if the person who submits the election is not a legal representative of the qualified beneficiary. The courts are very practical about elections, and have even inferred elections under circumstances of incapacity.

SCP is not available for correction by plan amendment.

Separate employment agreements will not avioid the problem. Even a one-off arrangement can be a pension plan, and this employer would have a collection of them. By themselves or viewed together, they don't escape. We know nothing of the intended design, but atomizing does not change the issues.

PHLester: What makes you think what you did was compliant with the law? "Select group" is not enough by itself. How does katieinny get to the "management" or "highly compensated" components of the definition?

There is no question that the decree is a DRO. All DROs are imperfect QDROs until the plan administrator determines qualification. If the decree were not a DRO, the plan would not implement restrictions on the account (assuming the plan knows the law better than the DOL). I don't see what is the fuss, especially for the 401(k). The DB plan might be a more interesting situation depending on the plan's death benefits and whether or not the divorce decree speaks to death benefits. Death benefits are not awarded automatically under most DB plans; the order has to award them experessly. Even if the divorcce decree has a lot if details, it probably does not mention death benefits. Is that fatal now because adding the death benefit terms after death is too much? Or does one infer death benefits from the express award of regular benefits becuase it is unlikely that the asymmetry was intended? If so, then the post-death order that qualifies can pick up the express award and details. That is a tough call because I have seen deliberate asymmetry and there are many nuances in defining death benefits that relate to the award of the regular benefit -- it is not a matter of automatic mapping.

Only the opinion of the plan counts. That could play out either as not recognizing the termination for purposes of distribution or not rehiring you for fear of consequences of an improper distribution.

The ERISA claims procedure requirements are at ERISA Regulation section 2560.503-1.

1. The Department of Labor spit on us with its useless regulations on a difficult subject. The Department has a very low batting average on QDROs. The standards are uncertain. 2. I think it depends on what the divorce decree said. It could be rehabilitated, or not. If the decree mentions dividing the retirement benefits with enough clarity and particularity that a subsequent order is only an embellishment on that substance, then a valid QDRO is possible. If the original terms about property division do not demonstrate intent to divide the property with enough particularity to keep the former spouse from just making up substantive terms (without opposition from the dead guy), then the door might be closed to an order. How the subsequent order comes about might make a difference. If the children get involved in the state court proceeding to limit the imagination of the former spouse (which may be impossible under state law), then the plan might not have to be so critical. 3. The statutory 18 months does not apply as you suggest. I assume that is where you got the number from the statute. I think the standard for correcting qualfication defects is a reasonable time. Trustees of Director's Guild v. Tise (9th Cir.).