QDROphile

Your payroll service provider is not coherent and and has no business telling anyone what the plan matches or not anyway. Stopping the match at $16,500 of elective deferral is not likely a function of matching based on payroll periods. If the plan says match on catch up amounts, then match. If the plan matches on a payroll period basis without a true-up, then you have to step through the contributions pay period by pay period to see if the periods have the effect of reducing the potential maximum aggregate match. That can happen. But determining if plan provisions have been followed is the job of the plan administrator, not the payroll provider. The payroll provider is likely to try to justify its inferior product or services by blowing smoke about qualified plan rules.

You can certainly argue that section 125 only speaks to amounts that are taxable or not, and whether or not something is a fringe benefit does not depend on taxability. I just think that a section 125 arrangement is perceived as involving a choice between a nontaxable benefit and cash compensation. That perception may be wrong, but it is the one that you will probably be confronted with and have to disabuse.

I don't think you are going to correct for only the open years under EPCRS.

The cafeteria plan context has its own considerations that set it apart. Otherwise, I think fringe benefits can be a broad concept, and anything is a candidate when there is no correlation between the dollar value and services performed, such as you find with most welfare benefits.

I would consider car allowance to be a fringe benefit. Cash payment is not the only consideration.

In the context of a cafeteria plan I do not think that cash in lieu of nontaxable benefits will be a fringe benefit for regulatory purposes (e.g. safe harbor definition of compensation) but for plan design purposes the amount can be excluded from the definition of compensation that is used for calculationg benefits (subject to the discrimination rules). I can see your point, but I don't think it would be distinguished in the deep-rooted practices and understandings under section 125. Certainly the starting point of an auditor would be that the cash is not a fringe benefit. The car allowance analogy falls apart when it runs into section 125.

I think there have been various related posts. The answer depends on the facts and the terms of the plan and the plan's written QDRO procedures. Your facts point out the shallow thinking behind the Department of Labor's informal position on the subject -- that the plan adminisitrator has to take precautions to protect a would-be alternate payee's potential interest in the plan based on informal information about the possibility of a QDRO someday. P.S. The DOL position is legally wrong if you tally the court rulings on the subject.

It was not a flippant response. Curt, maybe. Depending on the facts, circumstances and documents, pretty much any of the outcomes you identified are possible. It would be impossible for enough information to be given on the board for an informed comment about which possibility seems to be most likely. You need an experienced adviser to evaluate and make the most of the facts, whatever they are. You got one refinement. It is very likely that some merger scenario is involved. But we can't say, so we don't.

Same answer: "Your ERISA attorney will help determine which is correct."

I have no working experience with any particular provider. I know some of them because they have been associated with questionable transactions, but that does not mean that they will not serve perfectly well. Google "real estate ira investing" and some names will come up to the top. At least one of those names appeared as a recommendation in a Benefitslink post similar to yours some time ago. No recommendations from me, except get good advice about legality of the investment. The IRA provider might not be the best source of that advice, either directly or indirectly.

If it is a transfer of all the assets without participant election, it is a merger.

All IRAs are self directed. The question is, what sort of WFS assets the custodian will administer, and at what price? Most IRA providers draw the line at domestic publicly traded securities. An internet search will turn up some custodians that will administer just about anything. Some specialize in real estate and related paper, but don't limit the scope. In fact, some of them are known for administering bogus arrangements. The custodians have documents all ready for the willing customers, no custom drafting is necessary. Consultation with a lawyer is a good idea for different reasons, but having your own custom drafted documents can be so elegant.

1. Ask and see if you get rejected. 2. Check the IRS website. The IRS issued guidance recently about what is acceptable. 3. It would help a lot if the expenses were for a tax dependent.

What about the first problem identified by david rigby? Does the participant have the right to a loan that is not limited to the due date of a prior loan? We all know the answer is found in plan terms, but the original post suggests that the plan terms do not restrict the loan.

We don't want EBSA to know what the law is.

Good. The feature should be optional, especially because so many organizations are not equipped to administer it properly. But section 1.403(b)-5(b) leaves one wondering. Since "contract" is everything in 403(b), I guess the reference to the contract as the limiting factor allows the plan terms not to provide for the catch up feature as long as no contract offers it. Does that mean that sponsors have to investigate all contract details or get representations from the contract providers? Ha!

I don't think the plan can leave it to the participants to determine what amount of catch-up is permitted. The plan can require the a participant to provide the plan administrator with the information that demonstrates the availability. Most of that information is information that relates to the employer (compensation, service, past contributions), so the interesting question is whether or not the administrator has to independently verify, or just has to reasonably believe the presentation. And I suspect that a lot of participants would start by asking the employer for the information to be included in the presentation. Also, depending on how you read the regulations, one wonders if a 403(b) plan can choose not to include the catch up feature in the plan.

IRS says that a 403(b) plan cannot be administered by participants (meaning the participant is responsible for compliance relating to the participant). I think the limitation on the catch-up fall into falls into that category.

1. Union plans are inappropriately rigid in dealing with domestic relations orders. 2. Fitting child support into qualification requirements is not easy. 3. It would be almost impossible for you to give us give us enough information in this forum to determine if the plan position is inappropriate. As david rigby suggests, the terms of the plan other than the terms dealing with QDROs may affect whether or not an order is qualified. Your post suggests that you are trying to get the plan to pay "early." It sounds like the plan will not let you do that, subject to section 414(p)(4) of the Internal Reveue Code.

I advise clients that the only way the plan should allow division of an annuity stream of payments is to divide each payment to the participant in some way (e.g. 50% goes to the participant and 50% goes to the alternate payee). I advise not to allow division of the benefit (i.e. the actuarial value of the benefit) or allow the alternate payee to be paid in a life annuity form. A plan could take this approach, but it is not advisable. An order cannot require a plan to do anything the plan is not designed to do. In other words, the order you describe should not be qualified. Assuming that in these circumstances the plan is designed only to pay certain periodic payments to the participant, the only thing the order can do is to assign some amount of each of those payments to the alternate payee for some time, not extending beyond when the payments to the participant would stop (probably death of the participant). That division might get fancy, but it has to adhere to the principle. If the order does not say so, if the alternate payee dies before the participant, the alternate payee's portion of the payment should be restored to the participant prospectively. The payments should not continue to a non-alternate payee under most DB plan designs.

What is your relationship to the plan?

Your 401(k) administrator owes you a much better explanation of how the administrator reached a conclusion that appears to be wrong at an ERISA 101 level. The explanation should start with why the arrangement appears to be a problem, and then provide legitimate support for the conclusion that it is not. Once that explanation is given, the administrator might then have to give an explanation about why you should not be looking for a replacement. Maybe not. Let us know what happens.

As AndyH points out, the questions relate to whether or not the order is qualified, which is why the plan administrator should be asking for assistance with the actuarial matters. The Plan adminstrator can't make a determination about qualification without resolving the questions.

You do what the plan administrator asks you to do, but you may need to explain the actuarial issues to the plan administrator so you can get proper instructions. The plan administrator needs to be sure that the amount provided by domestic relations order does not exceed the amount (value) that the plan would pay to the participant, taking into account wneh the benefit is paid to the alternate payee. That could mean the the value of the accrued benefit is less than $300,000 now, but could be sufficient at the time of distribution. If that is the case, then the determination of qualification would have to be conditional and subject to contingencies. The plan adminsistrator has to resolve any conflict between the $300,000 and 50% of the benefit (if there is a conflict), so you need to point out if the order has inconsistent descriptions of the alternate payee's benefit.

A government entity cannot maintain a 401(k) plan unless it is a grandfathered plan. For federal tax purposes a governmental plan can calculate benefits pretty much however it chooses, so it can exclude whatever compensation it chooses. Rather than worry about interpretations, amend the plan to be clear about what is excluded. For section 415 compliance, special terms are required for plans that allow cash in lieu of nontaxable benefits only for employees who can show alternate covereage. A government plan must comply with applicable state law, so the federal tax law is not the only concern.