QDROphile

Section 125 is not involved unless the employees have a choice between receiving dollors in take home pay or some benefit like health coverage. You did not exactly say that and it is the critical fact in your question. Otherwise, your broker might not be wrong about certain things, although even in the best light I would question what is meant by "enroll." Everyone needs to be enrolled, and family members who are covered need to be identified.

IRC section 408(m), prohibited transaction rules under IRC section 4975 and ERISA section 406, regulations under ERISA section 404©, ERISA section 404(b). You might also consider issues related to receipt of unrelated business income.

Going back to your original post, I misread the message. I thought the plan provided for matching catch-up contributions. Let's get that out of the way first. The IRS preamble to the regulations says that a plan cannot provide that it will not match catch-up contributions. However, the regulations don't say that, and one could get around the proscription anyway, so we can drop the subject if we want to limit the discussion to legal matters. Policy is another matter. With my misunderstanding out of the way, the problem is the pay period by pay period match (as correctly discerned by Tom Poje), but I have not seen this particular phenomenon, the employer would have no liability for instituting a pay period by pay periond match. However, the fiduciary might have some liability for not properly explaining to participants the dumb ass nature of how the system works, the potential for getting screwed, and the approach that can be taken to avoid being screwed. It would be a a stretch, but the failure might also be parlayed into a violation of the rule aginst impediments to catch-up contributions. Check the SPD and other communications about elections. If there is not some warning about the unobvious problem and the potential for missing the maximum match by a reasonable elective deferral schedule, the fiduciary should be concerned. This arrangement is particularly sinister. An even deferral schedule is a typical the solution to the usual version of problem. But shame on the employer even if there is no liability. A true up is the best practice. Why set up an employee benefit and then make it tricky?

So did Lenny Bruce.

First describe in detail how the payroll period match design has an adverse effect on matching catch-up contributions. The premise of the question is not clear and is suspect.

austin 3515 You get it. Since the $1000 will show as W-2 compensation, the starting point for examination is that the $1000 is part of regular compensation, subject to a negative election of benefits. You may have to convince someone that the $1000 is intended by the employer as a health fringe benefit, subject to an election to receive cash. You also have marshalled your support for that argument.

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.