QDROphile

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.

Although the plan may allow refinancing, a plan cannot loan an amount for a term of greater than 5 year to refinance a home loan. Loans for a term of greater than 5 years are allowed only for the purchase, not a refinancing of a purchase. Looks like the first refinancing was a violation since it was for a term of more than 5 years.

Unfunded health FSAs that qualify for the small plan exemption (under 100) need not file Form 5500. The exemption is the small, unfunded plan exemption. Health FSAs have no special exemption, funded or not.

If the ESOP will allow participants to choose to have rollover amounts or elective deferrals invested in employer securties, then you need to look into compliance with securities law. If rollover or transfer amounts will be invested in employer securities without participant direction, then you need some serious consideration of fiduciary issues.

Cafeteria plans have not been subject to Form 5500 filings for many years. However, the ERISA plans that are funded through a cafeteria plan are subject to the reporting requirements. For example, a health care spending account is subject to the reporting requirements. A dependent care spending account is not.

The plan was required to provide a notice of receipt of the domestic relations order and to determine qualification and provide a notice of the determination. The plan apparently has no evidence that it acted as required. Although late, it should now follow the rules. Rather than provide a separate notice of receipt, the notice of receipt and notice of determination can be combined. That will be a bit less embarrassing for the the plan. Get busy. The plan may have to deal with some of the consequences of tardy action, but it has to start somewhere and the rules provide the map for the start.

You are correct. Another angle is under section 411 of the tax code. If the fee is assessed only with respect to terminated participants, there is a detriment imposed on a participant that does not consent to distribution. Some would argue that the detriment does not violate because the fee not significant.

Has the sponsor thought about what it is trying to accomplish with the match? A match for top-hat employees only is not much in line with credible reasons for a match. Methinks that the sponsor accepts at some level of awareness that the sponsor is increasing compensation for the top-hat people. But why with a match? Surely the value of the employee (which warrants the greater compensation) is not directly related to the employee's propensity for savings. Why not just have employer contributions to the 457(b) plan at the amount the employer decides is appropriate for the raise the employer is giving? Or does the employer like the idea of an employee deciding the amount of the employee's raise, subject to the employee's ability to save?

Your latest question was already answered.

Where does "just as if they had their own savings account with Schwab" begin and end? Can participants order up their own distributions? Plan assets must be held in trust ansd particpant access must be limited to providing investment directions. The plan is almost assured of disqualification errors if it does not maintain control over custody and movement of funds. Sponsors that want maiximum flexibility and minimum responsibiity are dangerous.

Has the plan administrator (or a predecessor) taken an implied position that the plan is qualified by not reporting income in prior years as a result of the disqualification? Should the implied position be reported, if only to explain that if the plan were disqualified in some prior year, some or all of the amounts actually distributed this year should have been reported in an ealier year? If enough years have passed, some recipients may wish to take advantage of the statute of limitations. If the administrator is able to punt, shouldn't the administrator step up with full information, or at least a warning about the possible additional complexities, to allow the individuals to make informed choices?

A plan administrator is required to determine qualification within a reasonable time. Some people mistakenly believe that means not later than 18 months. The prior review was probably not a determination of qualification. A plan determines whether or not a domestic relations order is qualified. Until the order was issued by the court, it was not a domestic relations order. I am not really addressing the heart of what you are asking. The answer depends on the circumstances and there are a more circumsntances than you can report.

Review the EPCRS procedures. At a minimum, the plan needs to advise the former participants of the excess and the consequences of rolling over amounts that are ineligible for rollover.

Why can't the plan have a definition that is lesser, but included, in the regulation definitions? I don't think such an on/off switch is a toggle under 409A. Perhaps if you string them together in various combinations. Changing the definition with respect to accrued amounts is another matter. Adding the value restriction could provide an impermissible deferral. Assume that the change in control triggered the payment, except that the new value limit prevented the trigger. The deferred amounts, payable before the amendment, would not be payable until later because of the amendment.

It appears that you agree with my point that the plan adminstrator has more to do with a determination that an amount is neceesary to avoid foreclosure or eviction than taking a representation from a participant. Therefore, to return to the original post, a paperless arrangement is not appropriate for demonstration that the plan administrator made a proper determination. You identified records that the administrator should receive before making the determination, and those records should be retained by the plan for some time.

I think the regulations allow reliance on a representation of the participant only with respect to availability of other resources to meet the need. See section 1.401(k)-1(d)(3)(iv)©. The plan administrator does not have to investigate the participant's assets and finances. The plan administrator has to make a determination of all the other matters. And it does matter to the plan. Bad hardship withdrawals can disqualify the plan.

Even if you don't have fraud, you have people under stress who do not fully understand the standards and are not looking to be conservative (to say the least). The typical example is the standard for preventing foreclosure or eviction, and I don't think a notice of a missed payment will suffice in most cases, but I don't expect the participants to come up with that conclusion by themselves. Unless an informed person gets a lot of specific information, a proper conclusion can't be reached. The easiest way to get full and true information is to have the materials in hand, not described by the participant and perhaps subject to a few questions. If you really are limiting the question to availability of other resources (not a question in a safe harbor design), the regulations do allow certification by the participant and the plan administrator does not have to make a determination (but can't avoid what the administrator actually knows).

Except I can't find where the law allows it.

Normally a plan loan that that has missed payments and is beyond all cure or remediation periods is treated as an offset distribution if the participant is entitled to a distribution. Check the plan documents. Many variations are possible.

I would start with the proposition that the order is not qualified because the plan is in a position in the termination process that cannot be changed by an order. But if the contracts have not been distributed I would test the proposition with the inquiry to the annuity company as suggested by jpod. If the annuity benefit can still reasonably be divided into two contracts, then the plan should do it. I don't think I would consult with the participant or alternate payee about how to proceed.

What is the source that informs us of the IRS interpretation of the effective date provision?

Depends. Are you the Man from Glad?