QDROphile

See Treas. Reg. section 1.411(a)-11(e) and work backwards.

It may be a bit old fashioned to deliver stock certificates but it is really the most tangible way of transferring assets in kind. The certificate should have included an assignment or transfer power. The trustee can hold the certificate after transfer of title on the book of the company (deal with the trnasfer agent) or arrange for custody in electronic form, perhaps with a depositary arrangement. If you rearrange via selling and repurchasing, you may incur unnecessary transaction costs and that has fiduciary implications. Maybe you are not in a position to accept in-kind rollovers. If not, do not accept the rollover of the shares. Better to stick with your policy than botch the transfer and custody.

bobolink: A registration violation gives the investor (plan participant) rescission rights. I have always given up on figuring out the consequences of implementing a rescission, but one of them appears to be disqualification of the plan.

At least 30 days before the distribution, your spouse will receive information about the tax effects of the distribution. Or you can look at IRS Notice 2009-68 to pick up the information in generic form. You will have to get information about basis of the stock to be able to evaluate the option that allows some of the distribution to be taxed at captial gains rates, if a stock distribution option is availabe.

Your thinking, in the abstract, is correct. Next you apply the thinking to determine what the alternate payee will get. Since this is a common situation, the plan's written QDRO procedures should provide the details, including that the division of benefits will take into account the loan balance unless the order otherwise provides. The QDRO procedures should also say that the alternate payee's award will be satisfied out of assets other than the loan. If you get any complaints that inclusion of the loan was not intended, then the shame is on the complainer for not reading the QDRO procedures and you will have no qualms about any need for the draft to be rewritten or the order to be amended, whichever applies. The response from the plan should state that the calculaton of the alternate payee's benefit includes the loan, but the alternate payee has no interest in the loan.

Although nonelective contributions are not subject to the same rules for in-sevice distributions as elective deferrals, when it comes to hardship as a reason to allow the distribution most plans still apply the 401(k) standards because of greater comfort that the 401(k) standards will comply. The other rules are not as precise, so borrowing from 401(k) feels better and administrators are more used to applying the 401(k) rules. Some nonelective contributions are subject to some of the restrictions that apply to 401(k) deferrals.

The document can be written to avoid the 6 month suspension if the adminisrator does not rely on the 6 month supension for a distribution to be deemed as necessary to satisfy the immediate and heavy financial need. The adminstrator is required to determine that alternate resources are not available to the participant. Treas. Reg. section 1.401(k)-1(d)(iv)© is available to the administrator. The determination about the car being an immediate and heavy financial need is another subject and a different safe harbor is involved in the determination.

See Rev. Proc. 2008-50.

Government 401(a) retirement plans are not subject to discrimination rules of the sort cross testing addresses unless applicable state law or plan terms provide otherwise.

The plan still needs a value of the assets for reporting the distribution even if the distribution is rolled over directly. But one might apply the two part test to decide what standard to use for the valuation.

The plan will need an appraisal for determining the amount for reporting and calculating the wihholding. There are IRA providers out there who will hold LLC interests for a price. The Dr. sounds like someone who doesn't like price.

That does not mean that the plan is not required to file under VCP with respect to the retroactive amendment. The requirement for application for a determination letter is a separate requirement that applies to some, but not all VCP filings.

A disqualified plan remains disqualified. The statute of limitations may be relevent to the years for determining the penalties and loss of deductions, but not ending the disqauified status of the plan. The employer is trying to be too clever. Bite the bullet and correct. Not keeping records correctly will appropriately increase the pain.

Go to the "Secuurities Law Aspects ..." column and you will see a relevant topic in one of the most recently updated posts. The initiator of the post is "Lizana"

Securities law issues.

You might get some ideas from Field Assitance Bulletin 2006-1.

State law corporate governance issue.

david: The Department of Labor believes that a plan has the obligation to lock (very indefinite term that is not the DOL's term) a participant's benefit if the plan has any reason to believe that a domestic relations order will be submitted some day. That is contrary to the words of the statute and the only published federal court decision that I am aware of. A plan is required to act only after receipt of a domestic relations order. There are other misconceptions that the DOL has about QDRO procedures. The DOL typically does not consider the isses for plan administrators (including ERISA duties) when it comes up with its informal positions. I can understand why, including that there are many wrong-headed adminstrators out there that cause unnecessary trouble. While I am complaining about the DOL, its recent QDRO regulations are fluff. We did not learn anything we did not know before Congress acted to require the regulations. The DOL did not get into any of the difficult or interesting issues to guide us.

The problem with that publication is that it contains a few legal errors. The Department of Labor has some erroneous understandings, including about protection of would-be alternate payees before a plan receives a domestic relations order.

You may be dealing with a blockhead administrator, so the following bits of information may not be much practical use to you: A plan is required to have written procedures for QDROs. There are no standards and the procedures are not required to be filed with any authority. The procedures must be provided on request. A plan administrator is not required to protect a would-be alternate payee until receipt of a domestic relations order unless the applicable QDRO procedures are more agressive about protecting alternate payees. I believe that any domestic relations order will do. Even if the DRO is not qualified, the plan must allow a reasonable time to cure the qualification defects. I also believe that the court procedures and claendars need to be taken into account for determining a reasonable time. The 18 months starts when the plan would make a distribution that would be affected by the domestic relations order, if qualified. I don't know the resolution of conflict between (i) the reasonable time for cure, and (ii) 18 months. If I were not a blockhead administrator, I would go with reasonable time for cure. If the plan is a defined benefit plan, beware the annuity starting date and hope noboby dies before final resolution. Those events profoundly affect what can be done. None of this information includes any suggestion about how best to go about any particular action to best protect your rights. The more the administrator is wrong and resisitant, the more you need competent legal counsel.

Someone must serve as the coordinator to make sure that the rules in the statutes and regulations are followed, and the information sharing agreements must require that the providers report to the coordinator and abide by the coordinator's dictates in making loans. The coordinator cannot make a provider loan amounts contrary to the provider's rules, but the coodinator can disallow loans that a provider would, by itself, make to the extent necessary for compliance with the law and plan terms. The plan should have some baseline loan terms, but allow room for the terms of the loan products of the providers.

Are they not complying with plan terms or does the plan, incredibly, describe how the true-up contributions are not made for HCEs?

Under conditions that would cause the transactions to be exempt from proscriptions on prohibited transactions. See section 408 of ERISA or the procedures for obtaining a personal prohibited transaction exemption from the Department of Labor.

Notice about qualification is required to be given within a reasonable time. No time is specified by the statute. However, unreasonble delay could be a breach of fiduciary duty. Fiduciaries would want delay to be because of others, not the inattention of the fiduciaries. The comments about the 18 months do not go into important details about how the 18 month rule works and the provisions of the 18 month rule about consequences for payments after failure to resolve qualification do not provide protection for fiduciaries.

Loan payments would probably be held to the same standard as elective deferrals -- a few days from pay day at most under usual circumstances. Correction of late payments usually involves the employer putting some more funds to account for time value of the money -- different terms of art and measures may be applied depending on how one looks at the delay.