QDROphile

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?

Sentence 1: Yes. Sentence 2: Yes, if a contribution can properly be made. You can also put a bullet in one or more chambers of revolver, spin the cylinder, put the revolver to your head, and pull the trigger. You can also wear white after Labor Day.

Were the profit sharing amounts (A) not presented in the in the K-1 at all, or (B) included, but not identified as an item that reduces income (or identified but not properly reflected on the Form 1040)? If (A), then the taxpayer did not pay any taxes with respect to the amount. If (B), the taxpayer failed to claim a reduction of income. While there may be a remedy for some years for the failure to claim the reduction, I don't think that makes the contribution an after tax contribution. Assuming that the plan terms do not provide for after tax contributions, this is a personal income tax problem, not a retirement plan issue. The situation may be the same for the elective deferrals. If the plan does not provide for after-tax contributions, the problem is on the reporting/claiming side and it is unlikely that the plan will provide the resolution. From the plan's perspective, nothing is amiss. Failure of the employer to claim a deduction is a personal/corporate income tax problem. I don't know enough about personal income tax to know if masteff's suggestion has any realistic hope. I know only of IRS sanctioned retroactive amendments to plan for the sake of resolving a plan qualification problem, not an individual income tax probem. Many income tax deductions are overlooked, and there is a limited time and method for claiming them if they are discovered.

Plans are now required to have language to prevent annual addition violations. Although violations can be corrected, repeated violations cannot be corrected under EPCRS. The solution for the situation you describe is to have appropriate plan terms, then each year test a pro forma contribution and adjust the allocations/contribution to fit the annual addition limits before delivery of the contribution to the trust. I suspect the practice in prior years was a violation, too. The correction provisions under old law were more limited than most people believed.

I was referring to the orginal advice about allocation of fofeitures by right of ownership. Maybe the adviser was a history major and is stuck on the divine right of kings.

I want to be an adviser on subjects I don't understand and get paid for my bad advice.

"Separation from service" was a concept under obsolete 401(k) regulations, associated with the "same desk" rule. "Severance from employment" is newer terminology in regulations. I will not take kindly to directions to use the phrase in place of termination of employment, except perhaps in the 409A context.

Perhaps an employer that properly considers and complies with coverage testing and other discrimination requirements should have gathered such infomation already for compliance purposes and would not have a serious burden when it came time to file with the IRS. It is a signal. It is an education. Isn't it nice that our government gets extra value out of the form and process?

The post from BED, post #2, in that string is accurate, and represents the Department of Labor view. Committee reports are not law and the only federal court case came out on the side of a literal reading of the statute -- no compromise of the participant's rights without receipt of an order. That court suggested that the plan, in its written QDRO procedures, could adopt the Department of Labor view (although that view is not well defined), but the plan involved did not; the plan merely recited the statutory language in its QDRO procedures. I subscribe to GMK's position, but I have written QDRO procedures to allow something other than a domestic relations order to casue restrictions. The problem is to define what it is, other than an angry phone call typical in divorce settings, sufficiently reliable to make the plan believe a QDRO is really in the works within a reasonable time. Receipt of an order is a nice objective standard. "About to get a divorce" is a long way from any understanding of ultimate effect on benefits, and the state courts are not strangers to funny antics with property. They have ways ... . DB plans have an especially tough time because of the benefit starting date rules. The timing of the order can make a big difference in the form of benefit and the options for dividing the benefit. Some argue that is is better to hold the money and then be wrong about holding it rather than let the money go and be determined to be wrong and have to chase the money or restore it personally. That argument makes some sense, but a participant can be harmed by an improper restriction, as happend in the federal court case restriction on investment changes in a market crash).

BTW, I did not look at the question and my intended message was "the amount you calculated" and not the prescriptive "the amount you calculate." I was commenting on your correct interpretation of the special ESOP rules and why it might not produce a "correct" answer. Evidently it is still a mystery.

The amount you calculate is the amount subject to the limit, not the limit. Maybe it is in the way the question is asked. Another way to look at the limit is the stated 415 limit amount plus the disregarded interest and forfeitures.