QDROphile

I think the consequences and the corrections for excess deferrals are pretty well established and a quest for an "imaginative" alternative solution is destined for either frustration or illegality.

The plan sponsor cannot charge a participant or a participant's account with respect to a loan because the loan is from the plan. The plan can charge administrative expenses for a loan. Plan sponsor personnel can provide administrative services to the plan and the plan can pay the plan sponsor for the services if the conditions of the applicable prohibited transaction exemption are satisfied.

With the new information, I agree you should let the plan go to the work of determining that that your decree is not qualified. That will force the plan to give you more information that will help draft a successful order. One thing that might change my mind would be information about processing or administrative fees that the plan would charge with respect to the orders and multiple determinations. Some plans do. Some don't. Some have a fixed fee, some impose fees that increase with with amount of work that is required.

The law requires action upon receipt of a domestic relations order, not a draft, a warning, a premonition, a desire or a fancy. Somewhere in your divorce proceeding is a domestic relations order. It won't be a QDRO, but it will trigger the requirement for the plan to protect the potential alternate payee interest for a reasonable time pending correction of the qualifiaction defect. Do the plan a favor. Tell the plan that you know that the order will not qualifiy and it is for the purpose of protection pending submission of an order that is intended to comply with qualification requirements. Save the plan the trouble of sending you a disqualification notice. Then diligently proceed to submit an order that will qualify. Sorry, the original text above is not clear. You will have to send the domestic relations order to the plan as a formality, even if you let the plan know it is excused from the qualification formalities other than protecting your interest. The best nonqualified order to send to a plan is one that mentions that the spouse will have an interest in retirement benefits, but the reference is not essential. No one knows what a reasonable time is, but the plan would be really stupid to use a short fuse. Your contact with the plan suggests that is is not too bright or helpful in this area.

Would it be too horrible to contemplate the possibillity the individual is a common law employee despite the leasing formalities? And will it ruin your life or the life of the medical practice to confront this possibility?

Consistent with my reputation I am going to grouse about the compentence of whoever was responsible for the amendment. Unless the intent was to vest every account, the amendment job was done incompetently. It is baby stuff, not rocket science, to ascertain the intended scope of the amendment, and to set forth that scope in the amendment in a way that leaves no doubt because yours is the very first question that gets asked about additional vesting. So when one does not see limitations in the amendment, one must presume that the vesting applies to the fullest extent, and that should be the outcome in any dispute. If that was not the intent, then someone should answer for the faulty amendment and the adverse consequences.

Ah, yes. I recall seeing it in a few prototypes.

What kind of feature lets an individual partner participant elect the amount of contribution other than an elective deferral?

Report the participant to the police for conversion?

Yes, but you need a lot more understanding before you implement such an arrangement.

How about something more fundamental? The DOL has to twist and turn and dodge and prevaricate because it absurdly maintains that the IRS requirements can be met without the employer involvement that was the standared for application of ERISA before the the current 403(b) regulations. The DOL denies reality because it does not want to be responsible for all the nonprofts in the total mess of noncompliance that is the 403(b) market.

Medusa.

Based on Schoonmaker and the statutes, including the 18-month rule, what should work (except for skull thickness of the plan administrator) is to give the plan a copy of the divorce decree that says the former spouse will get 1/2. The decree is a domestic relations order, but probably not a qualified one. But it should be enough for the plan administrator to realize that the plan is only required, at most, to protect the 1/2 that might ultimately be awared to the alternate payee under a QDRO. That means the participant can get some of the other half (so he says) to proceed. I am not going to spell out the detailed analysis that goes with the steps because it probably will not work. The Schoonmaker case might make the plan administrator pause a bit, except the the plan administrator put unwise provisions in the QDRO procedures (as mentioned in Schoonmaker) and is now put in a position to have to use good judgment and knowledge to get to a correct and practical outcome. Not likely, given the starting point. Also, you might combine TPA Man's comment to help the poor plan administrator with the dilemma.

Try Schoonmaker v. Employees Savings Plan of Amoco Corp., 987 F2d 410 (7th Cir. 1993).

Funny how the important employees are more likely to expect to be able to do what they want despite the rules. Or maybe the more important employees are the less likely to be concerned about what the rules are so they are more likely to ask the questions that no one else would need to ask.

Identify the source that says that an election under a section 125 plan to pay for dependant coverage can be dropped mid-year without an appropriate qualifying event and never trust that source again for information about section 125, or anything else. The irrevocability rule is so rudimentary and fundamental to section 125 that any source that gets it so wrong and advances such a wrong position does not have the self awareness, intelligence, integrity, or discretion to be trusted for anything. Maybe your first-grade child would get another chance, after some serious coaching.

Plans often do not take rollovers from outside IRAs becuase they are a pain. Does the IRA have after tax amounts? Has the IRA crashed becuase of noncompliance? Does the plan want to bother? A typical exception is a conduit IRA that has a clean history and records to prove it.

Does the summary plan description alert participants that explanations about benefits will be charged? Was the participant advised early in the process that the work would be charged, with an oppotunity to cease or restrict the scope of the inquiry?

Under usual hardship withdrawal provisions, you cannot get money to pay your lawyer for divorce costs. Most plans operate under a list, and your need is not on the usual list. Your plan administrator should have told you this up front at the time of the orginal request. You may have an ability to borrow from your account. Most plans blindly and incorrectly follow a practice of freezing accounts/benefits when the plan learns of a proceeding and anticipates a domestic relations order. Assuming that you you are eligible for a distribution or loan, you will need a knowledgeable kick-ass lawyer to get funds from the plan before the former spouse interest is formally resolved, such as qualification by the plan of a domestic relations order. Assuming you have enough assets in your account, you should be allowed to borrow. But don't count on any intelligence or understanding of the law from the plan administrator. A plan is required to have written procedures relating to QDROs, available without charge. Ask for them as see what they say.

You may be thinking about Rev. Rul. 2002-45, involving a breach of fiduciary duty.

Distinguish between your health plan and your cafeteria plan. Your cafeteria plan may be the mechanism to elect health coverage. Although 30 days is a common window, it is not an absolute deadline under section 125. You are correct about prospective application, but that applies to the cafeteria plan salary reduction, and there is some fuzziness to the rulle.

I am glad your intention under "creative" implies legal. Too often a request for "creative" means "the best way to avoid getting caught" or "give me something to argue if I get caught."

Since the child care is to allow the parents to work, if she is not working or disabled or going to school, you may get creative but you won't be legal.

First you have to determine IF you can correct the error. Does the particpant have children? If not, you can probably correct. If the participant has children, it becomes much more of a problem. There is no formal authority for correction, only innformal comments form IRS officials. the stnadard is pretty high for correction because plan cannot accommodate a change of expectations or general mistakes about the consequneces of elections. for example, if he did not have the dental work in the coverage period and timely submit for reimbursement, I would not even try to correct.

What do you mean by "electing out"? Is the election a one-time irrevocable election? If so, it probably carries through rehire. Any plan that uses one-time irrevocable elections is so sophisticated that it or its advisers already know all the answers to the questions you are posing. Does "electing out" mean that the idividual elects zero deferrals because the individual has agreed to the zero election in the contract? Does "electing out" mean that the terms of the original employment agreement make the individual ineligible for the plan and the new employment agreement puts the individual in an eligible class?