QDROphile

Go back to rcline's advice and take it seriously. Maybe your plan overlooks the point, but the 415 regulations speak to it.

Incomplete answer if you want the "best" fix, but you will find what you need in Rev. Proc. 2008-50.

See section 72(t)(3)(A) of the tax code. No cheap exit if you are starting in an IRA.

"top hat" and "qualified" do not go together. Sorry, fat finger premature send, and rereading of original post before resuming indicates that the point would not have any new ideas.

If your question relates to what your rights are now, it appears that your account has no stock in it and you may "withdraw all or any part of the excess of 25% of [your] Adjusted Account Balance (as defined below) comprised of stock ***." You may withdraw 25% of zero. It is tough to get a good answer to a question like yours in this forum. You could apply for withdrawal. If withdrawl is denied, the plan's claims procedures probably require that you be given an explanation for the denial, with reference to the relevant plan terms. You will need to follow the formalities of the claims procedure, which probably means you have to submit your claim in writing. The procedures are explained in your summary plan description or a separate document that you can get from the plan administrator. The plan administrator should give you an informal explanation of what you can do if you ask, but is not legally required to do so, and the explanation might not be reliable.

It looks to me like the LLC is a disregarded entity, which would mean that for purposes of the ESOP the employee is an employee of the bank. No problem with participation.

So how is it that the bank is the sole member of the LLC and there is no affiliation or control?

You don't need to deal with any of the joinder garbage unless the plan adminstrator or the lawyers are mentally disabled.

An unaffiliated employer cannot participate in an ESOP. An LLC employee cannot participate in an ESOP unless the LLC is a disregared entity and a corporation is the sole member. Two strikes. In this game, one strike and you are out.

Assume that an employee's gross pay amount is $1000 per month. Looking only at the insurance benefits (forget FICA and income tax withholding and other payroll amounts), assume the employee "pays" $100 per month for the benefit. That means the employee actually receives $900 per month in dollars. What happens if the employee does not take insurance benefits? Does the employee receive $900 per month or $1000 per month in dollars?

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."