QDROphile

1. A nitpick must be precise to maintain its integrity, authority, and fastidiousness. 2. There was no need to cavil with the statement itself. 3. I am such a bad typist that it was easier to copy and paste than paraphrase.

TPA vs PA vs Employer/Sponsor, one of my favorite nitpicks. The plan has a fiduciary plan administrator (PA) required by ERISA. That PA is appointed by the person specified in the plan/trust document, typically the plan adopter/settlor of the plan's trust, typically the employer/sponsor -- the Employer. As a separate matter, it is not the best idea for a corporate employer/sponsor to be the appointer, but that is an aspect of my nitpick that we will overlook this time. if the settlor does not appoint, the settlor is typically the PA by default. So typically the PA is the Employer. The settlor can appoint, or can authorize the PA to appoint, a special fiduciary for specified purposes, let's say for purposes of administering hardship distributions -- a TPA. The appointing PA can retain express authority to override the TPA, and has the duty to monitor the TPA and step in if the TPA is not performing in accordance with fiduciary standards (which would include operating in accordance with plan terms). If the TPA has been delegated authority and responsibility for hardship distribution administration, the the TPA decides, subject to the override by the PA to the extent provided in the plan documents (including the TPA contract) and ERISA fiduciary standards. All of this is implicit in Bill Presson's comment "The Employer does (absent 3(16)) do it falls on them." but there is a lot to understand and to line up within it. The Employer may or may not have a role.

I also approve of dope slapping, in addition to slapping with a class action lawsuit.

Long ago, a big name, but very aggressive, ESOP consulting/promoting company sold a design (and related services) that provided for terminated employees to keep their share-designated ESOP accounts, but instead of investment results of share ownership, the accounts got a fixed rate of return (I recall something like 3%), which was a way of limiting participation in post-employment appreciation because the company was “sure” of appreciation of 6% or more). The accounting got pretty wacky if your perspective is hidebound by compliance with applicable rules and conventions. The IRS gave determination letters on the plan documents, but the neither the IRS nor the DOL approved the concept in practice (among other things it is inconsistent with the definition of a DC plan) as far as I know and I have seen the operation challenged by the authorities as well as litigants. Never have I seen it vindicated by any agency or court.

Millennium Trust will probably accommodate. No basis for recommendation other than an investment manager I know and respect uses MT for property that is not publicly traded securities. I have little observational experience, but I have seen no problems with transactions or reporting. I know not about valuation questions. I am also not commenting on the idea of holding real estate in an IRA.

If any asset does not have daily valuation and daily liquidity, you probably need a policy that limits the “immediate” distribution to a percentage of the requested amount (e.g. 80 percent, depending on experience and fears regarding market volatility — downward) and a post-valuation true-up. Or you can have special valuations with respect to each special distribution. Management of assets, such as ordering of liquidation you mentioned, is another matter and is dependent on assets and current management. For example, how big is the pool and the cash-equivalent holdings? How many participants are there and what are the general liquidity projections? Beware the fit of any template you may come across — this is not necessarily just a matter of mechanics. Maybe if all assets have daily liquidity and daily valuation.

What have you done already? It starts by contacting the plan administrator to report the error and request correction. If you have done that and not gotten a satisfactory response (action, direction, or explanation), then it gets more interesting. I expect most of the contributors to this site would encourage you to allow enrollment to take effect. People in the business tend to value retirement savings, even though it may be difficult to part with some pay now.

This is no substitute for consultation with a domestic relations lawyer. Typically a divorce decree/judgment (which may include a separate property settlement agreement) will provide the basic economic terms of dividing the retirement assets, regardless of the nature of the account that holds the assets (e.g. plan, IRA, annuity contract). A domestic relations order that wants to become a QDRO usually does not address the economic division of retirement assets for the first time. It usually follows what was provided in the decree/judgment and "merely" supplies the technical provisions necessary for qualification by the plan. As noted above, a QDRO, as such, is inappropriate for dealing with an IRA, so another type of supplemental order is required, but it would look back to the terms of the original decree/judgment for the terms of division. If the original decree/judgment did not address the division of the retirement assets, or deferred the determination of how the assets would be divided to the consideration of the supplement judgment (or, mistakenly, a QDRO-to-be) you are going back to the domestic relations court for consideration. One way or another, you are going back to the domestic relations court concerning the division of the retirement benefits, and you should do that with the assistance of a lawyer.

If there is doubt, ambiguity, contradiction, or vagueness, the plan administrator should have authority to interpret and should do so in a way that is consistent with the law and proper administration.

If you are describing your document terms correctly, the document is unfortunately drafted. I prefer to use “participant” and it variants to mean someone who is eligible to accrue a benefit or has an account under the plan. I am not fond of “active” vs. “inactive” either because of what is included or excluded by implication (perhaps incorrectly). For example, an “inactive” participant may still be able to direct investment of the participant’s account. That sounds kinda active to me if I am not familiar with the definitions.

I have seen government healthcare organizations with 501(c)(3) determination letters. DOL Opinion 2005-07A 1) appears to lean heavily on the "de minimus" position of the DOL, and 2) warns that the opinion does not address any issues under the tax code. I recall from long ago (in the last century, so things may have changed) that the IRS has not adopted the same "de minimus" position with respect to non-governmental employees participating in governmental plans. As Ebplans stated, neither is your situation. Before you read too much between the lines or think the DOL can provide you with comfort, beware that on some evidently parallel provisions in their statutes, the DOL and IRS differ. If you can get the DOL to address the specifics, that may be very helpful, especially if on the negative side. "No" would be an easier way put an end to the question, no matter how the IRS might differ. I hope you are not being asked to validate or deny the status of the plan. All I can conclude is that you have legitimate concerns, whatever your reasons for caring.

Whether or not an entity is governmental for purposes of the low 400s of the federal tax code can be very tricky to determine and in my experience the IRS can be pretty demanding about the criteria because governmental plans are not subject to discrimination rules, among others. Your your penultimate paragraph is a bit simplistic, but is the starting point for the analysis. Your initial skepticism is warranted.

Extralegal question: If she expressly waived her interests, why are you trying to circumvent now?

If there is simply a merger, yes. The “original plan” is subsumed into the merged plan. As Bri suggests, the transaction can be designed differently with different outcomes.

I think the concern with engaging with the client is not getting involved in matters that are not within the scope of the services and expertise of the service provider, and knowing the boundaries and limits. This is a problem that many service providers have. It is very tempting to try to be everything to a client for the sake of client loyalty and respect and the client is not likely to appreciate limits by themselves. The client will go to the perceived least cost provider for as much as possible.

I agree with Bird and add that a similar confrontation would occur if the employee asserts that a non-deferral employer contribution should be made. They seem to be on the same page, and that effectively establishes an interpretation of the contract even if we outsiders don’t have the same interpretation. If one or the other steps outside of the interpretation, that is a contract matter, not a plan matter. I am curious about the enforceability of a promise (implied or express) to make a particular deferral election (in this case the employer might not care unless the amount is meant to limit the deferral). My first thought is not, because then it would not be elective. Or if it is, then it is not elective and the plan has a problem with treating the deferrals as elective deferrals.

What do the deferral elections indicate is happening?

Does the plan have a provision to require spouse consent to designate a beneficiary other than the spouse?

I am reminded of my conviction that we got section 409A as a consequence of “consultants” claims that our advice/interpretation about nonqualified deferred compensation rules was too conservative. The quoting function is illustratively mechanical in attributing Brian Gilmore’s statement to Luke Bailey.

If Voya is not a fiduciary, then Voya must follow the instructions of the appropriate fiduciary or convince the fiduciary that the ordered action is not proper (e.g. not permitted by contract or plan terms). If not, Voya should be fired and threatened with breach of duty. Taking on fiduciary functions by meddling (not executing administrative directions) makes one a fiduciary, whether or not named. If Voya is a fiduciary, then Voya must act in accordance with a plan terms or the instructions of a superior fiduciary and should be able to explain its actions coherently. Start by asking yourself, then Voya, if Voya is acting as a fiduciary.

One shortcut is to transfer the loan proceeds to the closing escrow for the house. This is also a procedure for a hardship distribution for purchase of principal residence, with the advantage that if the transaction does not close, I believe the unwinding of the escrow by return of the funds obviates the question about "reversing" the distribution - the distribution is contingent and does not occur. Is it a principal residence? I will leave that to others.

However, money is fungible, so if the individual is eligible to contribute to a Roth IRA, the net distribution $$ can be used to fund the Roth IRA. Not a rollover.

Many ESOP companies have a devil of a time with valuations in time for administrative needs, such as distributions, and the time mandates are more liberal than 60 days. However, valuation standards and practices for ESOPs are arguably more rigorous than would be required for nonqualified deferred compensation. Personally, I am somewhat cynical about valuations and what it takes to get a valid one for any particular purpose.

One of the aspects of the cautions against inexperienced assistance in these matters also applies to the "other distributable event" ideas: the different transactions have different implications, specifically including federal and state tax consequences. The tax consequences of dividing and account by QDRO vs some other avenue for extracting money from the plan for ultimate division of the account are quite different and would change the economics of the "equal" division between the parties. It is more complicated than dividing by two and filling in some forms.

Have the securities law issues been resolved for multiple employer 401(k) plans (not that anyone seemed to care much, ever)?