QDROphile

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.

The distribution from the plan cuts the connection with the plan and the participant. The IRA stands on its own.

One reason not to reform the benefit is adverse selection. If a participant with a single life annuity gets a diagnosis, the plan does not want a QDRO giving 100 percent of the benefit value to the soon to be former spouse.

I advise plans against allowing the benefit to be reformed. The order must split the payments in some way

Not to distract you from considerations about correct health coverage, but the employer must have a lot of leased employees or other exclusions to require coverage under a 401(k) plan. I would explore that proposition a bit more if the employer does not want to cover the leased employees.

Since I perceive an interpretation problem, I suggest that the plan's notice of detetermination state what the plan is going to do in a better way than what the QDRO says the plan should do, and invite dispute over the interpretation for some reasonable time (30 - 60 days) before paying. If the plan overpays based on a mistaken interpretation, remediation may require a lot of effort or expense.

If you are asking a question about how much of an account an alternate payee might be entitled to legally, the plan does not ask such questions. If you are asking how to interpret some QDRO provision to determine what an alternate payee gets, you have to post the provision. What you posted makes no sense to me.

I don't think the problem is terms of the order and the terms of the order cannot fix the problem. The problem is that the plan distributed funds (presumably to a nonparticipant and a nonbeneficiary) not in accordance with plan terms and not pursuant to a QDRO. The plan has an operational error. The plan needs to fix the error in accordance with EPCRS. Part of the fix will be getting a QDRO. As long as the terms of the QDRO describe the amount distributed and meet other qualification requirements, it will fit with the fix, but the fix will involve more than just qualifying the domestic relations order. Any provisions in the order relating to retroactivity can't save the plan from the premature distribution.

There is nothing wrong on the face of what you describe (the term "randomly" is disregarded), but without knowing a lot more, no conclusions can be drawn. You are entitled to know what assets are owned by the plan, but why fuss over which money market fund? Both the Department of Labor and the IRS regulate ESOPs, with differences in focus and subject, but some overlap. If you are looking for help, the Department of Labor is probably your best bet, but your concerns appear to be misplaced, at least as far as technical matters go.

Specifying the amount that may be reduced per pay periond is not the same as providing for coverage periods of less than 12 months. An employer can chooses provide $2900 of benefits for $1500 of salary reduction. While it might frustrate the funding intention for a salary reduction agreement to conflict with the intention for an annual amount to be reduced, that does not mean the plan and salary reduction agreement are necessarily well drafted. The tax and contract realities of section 125 arrangements are not well understood. Otherwise, why would people talk about pre-tax contributions to the account when there are no such things for tax purposes? Is it that everyone speaks only ERISA?