QDROphile

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?

Depends on the terms of the salary reduction agreement. Was the agreement to reduce salary for the year or a certain amount per pay period? If the agreement was to reduce a certain amount per pay period, the employer has no right to reduce the employee's pay by a greater amount for the purpose. Also remember that contracts can include implicit terms, including terms that can be inferred from regular adminstrative practices. The agreement had better be pretty clear that the "make-up" amounts can be taken from the few remaining pay periods in the year if that is what is contemplated. The employer should give a lot to thought about whether the amount is worth the risk of violating one of the most fundamental rules under section 125.

The trustee can purchase the shares by complying with the PT exemption for purchases and sales of employer securities. The ususual rub is the need for a contemporaneous valuation. The cost of the valuation increases the effective purchase price, although the trust does not have to bear the cost of the appraisal. The trustee also has to determine that the purchase is in the best interests of participants. Covering for the employer is not necessarily in the best interests of the participants.

And then the lawyer would sue the plan document provider?

Yes. The facts and the document/services bundle might get in the way.

The IRS has ruled that a commission is essentially part of the stock price, so it cannot be paid outside of the plan. Investment management fees are different, but you have to watch the detials of how the fee works to see if commissions can be identified. If amounts are added to the plan to cover the commision amounts paid by the plan, the additions would be contributions. I am amazed at stories of brokers who provide correct information about plan administration technical details.

Just for fun, read 18 USC 1954 and trust that the feds will use appropriate discretion.

Your interpretation is not necessarily the correct application of a Roth deferral election. I would guess that most plans apply the amount elected the same way as regular deferrals with respect to FICA -- the employee portion is taken from other compensation. Check the plan document or communications about withholding. I am sure whoever decided to add the feature considered all of the implications and communicated clearly to participants about the effects of the elections.

First, align the plan with the law and disregard the information about a forthcoming order. A plan is not required to act until it receives a domestic relations order. The plan terms and written QDRO procedures should be consistent often they are not because the plan has adopted a policy that is aligned with the Department of Labor informal position. That may solve the problem if the order does not arrive before distribution. Next, be diligent in anticipation of receipt of the order and process it immediately if the order arrives before distribution. If the order arrives too late for reasonable processing or correction of any qualification defects, the order is disqualified because it would require the plan to do something that the plan is not designed to do -- hold up the termination process. Best practice is to notify the person who advised of the expected QDRO that the plan waits for no order. That avoids any criticism of deception and it allows the individuals to gear the property division to what will be available when the division is determined.

A rollover is to an IRA, not an LLC in which the IRA invests. Perhaps the disregarded entity rules allow cutting corners on observing the formalities relating to the distinction, but I would prefer a two-step process, and a plan administrator executing a direct rollover would be more comfortable with sending funds to a designated IRA rather than an LLC.

"Get real." I have great sympathy for those who are real enough worry too much about compliance issues. A plan administrator does not have to look behind a domestic relations order that looks good on its face, especially if the concern relates to local court procedures. Courts can take care of themeselves, and if a plan qualifies an order that comes out of some state court irregularity, it is up to the participant or alternate payee to object, explain to the plan, and, take corrective action. The plan should accommodate contests, but is not the arbiter of state court matters.

Probably. Ask for a more detailed explanation and a full description of the corrective actions to be taken.

"It might help if you actually read ERISA." I was reading the posted comment that said the loan was from TIAA-CREF (not the annuity contract) and was secured by the participant's interest. In my first post, I started with the statement that I was not looking at the source documents. I do not start with the presumption that someone is mistaken, but I may question a curiousity. So I was reading what there was to read, including the portion of ERISA relevant to the precise point of a discussion in progress. Your observations about what probably was really the nature of the arrangement were helpful. Your failure to read closely the dialog without a presumption that everyone else is an idiot produced your misplaced criticism, which did nothing to enhance your useful comments. So now that we have the attention of somebody who knows something, and we go back to the original question after some unnecessarily painful education and discipline, does the plan fiduciary have any responsibility with respect to compliance with the loan rules, specifically the interest rate?

And this is allowed under the anti-assignment provisions of ERISA because ... ? I never try to explain, and I try to avoid having to to comprehend, how TIAA-CREF works.

Without seeing the words on the page, if this is an ERISA Plan, the fiduciary appears to be doing one of two things, (i) determining that the rate set by TIAA-CREF is a correct rate (and how does the fiduciary justify that without knowing more about how the rate is set?), or (ii) engaging TIAA-CREF to set the rate. Since (ii) would be engaging TIAA-CREF to be a fiduciary and TIAA-CREF would not accept that engagement, I wold not rely that explanation. This is one of those rough spots in the 403(b) environment where the unexamined and undisciplined past practices provide discomfort in the new light. Loan interest rates in any environment are troublesome, since most of the the arrangments are unconscious. Your problem is that you understand and you care, which makes you especially unsuited for 403(b) plan work.

Not the issue you requested, but at some point be sure to notify the plan that you are not responsible for advising the plan about securities law compliance. If you have no idea why this suggestion, all the more reason to make clear the limitation on the scope of your engagement. There are securtities law issues with multiple employer 401(k) plans. You are probably protected if your engagement agreement specifically identifies what you do and excludes everything else relating to plan design and administration.

"No way" is the answer that law intends and requires, ever since the 1980s. More recently, the courts have been concluding that a domestic relations order cannot intrude on the survivor annuity. Maybe a different answer under a governmental plan.