QDROphile

The record keeeper is not required to do anything the record keeper has not agreed to do. A domestic relations order is not qualified if it requires the plan to "provide any ... option" not otherwise provided under the plan. The full meaning of 414(p)(3)(A) is untested, but it suggests that the question becomes what is reasonable by way of plan record keeping. Can a plan reasonably keep no account balance records of any sort after six years. Other posts in other contexts have have advanced the idea that plan account records have to be kept longer in order to confirm benefits. Recocrd management can be accomplished in many ways, such as by contract with the former record keeper. But what records? Let me suggest what would be resonable to expect, and maybe that will give you something to go on. It would be reasonable to expect that a plan would keep quarterly account balance records. Change in service providers would not excuse the record keeping requirements. If a date is chosen for a division of an account balance, the plan would use a proximate quarterly date either specified in the order or in the plan's default specified in the plan's written QDRO procedures. For example, the plan's default could be the next quarter balance on after the date specified by the order. It is unreasonable to expect the plan to compute earnings and losses on the alternate payee's portion of the divided balance from the intial balnce to the present day, at least across a change in record keeping services. So the most a participant could expect is to be provided with a proximate quarter balance. The particpant will have to bring down the balance somehow to a date within the new recordkeeper's service, and then the new record keeper might calculate earnings and losses from that date to the time of distribution to the alternate payee. Why are you not asking this question of the legal counsel involved in the determination of qualification of the order? And why did the plan adminstrator determine the order to qualified when the order could not be adminstered as approved? That is part of qualification.

How is monitoring plan investments not advising the plan? Do you care where in the country the adviser is based?

There are no external requirements for nonqualified plans and consequently there are no external default provisions.

If not for the QDRO, if allowed, would any benefits be paid to a beneficiary? If so, would the QDRO reduce benefits payable to the benficiary? My initial reaction is to deny, but the plan may decide otherwise depending on anticipated contest.

I don't see the conflict with recognizing that the AP's interest is only derivative of the particpant's interest, and therefore not really a separate account for many purposes, including section 401(a)(9), and requiring some authority for forcing a payment to an AP. In fact it is consistent. You can't force payment to a participant except under limited circumstances, so why would we assume that a different rule applies to the assigned portion of the participant's interest? Looking at it another way philosophically (which is dangerous in ERISAland), REA was supposed to provide better rights for women and get Ronald Reagan reelected, so allowing the interest to stay safely in the plan, where it was pre-divorce, makes sense. Or if you want to look at REA in yet another way, you shouldn't force payment on the little miss because she can't manage her financial affairs by herself. In other contexts, an AP can't get paid before the participant is eligible for payment, so we have a statutory provision about payment at "earliest retirement age" to allow AP's to pry benefits from a plan. Evidently the law anticipates APs hanging around in the plan rather than expects APs to be banished.

If a domestic relations order is not asking the plan to refrain from doing something the the plan is entitled to do, there is no basis for resisting the terms. I am suggesting that the plan cannot kick out the AP, therefore the provisions in the domestic relations order saying that the AP can defer distribution are not improper. If you can find some basis for the plan's ability to require the AP to take a distribution immediately, then you can think about objecting to the provision in the order. There are limits on the AP's ability to defer. A generally accepted (but maybe not correct) idea is that a benefit below the mandatory distribution amount can be forced out.

See Rev. Proc. 2008-50, and pay particular attention to provisions relating to egregious failures.

Please explain how you can force an alternate payee to take a distribution even if the QDRO does not expressly provide that the alternate payee can defer distribution. I don't buy the argument that the alternate payee can be forced out because the alternate payee is not an employee.

It IS a matter of what is permitted and what is permitted is listed in section 125 of the Internal Revenue Code and described in the other Code sections that are listed in section 125. The point about disability benefits is well taken because of the unique rules that apply to the taxation of the benefits. In order to understand the rules, you will have to get away, at least temporarily, from the misleading "pre-tax" terminology. You also have to be careful about products that mimic conventional names, but have attributes that cause them to fail the requirements. For example, insurance policies that pay a per diem amount if you are hospitalized look like medical insurance, but do not qualify under the applicable rules. Such products are aggressively marketed (quack, quack) and the sales disclosure may not be the most complete and accurate with respect to eligibility for section 125 plans.

Same answer from me as above and from mbozek. A plan can pay only an alternate payee or an approppriate custodian for an alternate payee. If the orer provides for payment by the plan to someone else, it is not qualified and ineffective.

The provider was an idiot who got snookered by an insurance sales person. Probably violated state or local law in the process. Life insurance has no place in a governmental 457(b) plan. I am not saying that life insurance is not permitted under tax law.

Treas. Reg. section 1.409A-3(f).

Any compensation in any form that the individual receives after the cancellation, other than amounts specified in a pre-deferral contract, are under suspicion as accelerated deferred compensation payments. Raise? Bonus? Options? Stock? Can he live with his predetermined compensation package? Depending on the terms of his deferral election, he may not be able to cancel the future deferral of a portion of his predetermined compensation.

Please explain how the plans were "terminated"" and yet there is the possibility of new participants. What does "terminated" mean? Unfortunately, there are at least two meanings to "termination" becuse of the IRS position that a plan is not "terminated" until all the assets are disbursed. The colloquial definition implies no new participants and should be effective for cutting off participation unless there is something strange about the resolutions. A termination has to lead a double life becuase it is almost impossible to have both definitions effective at the same time.

The Plan's written QDRO procedures should have a default provision on the subject. This is a common situation.

I don't recall a fine relating to noncompliance with ERISA claims procedures. It may be a breach of fiduciary duty to disregard claims, but I think the consequences of failure to comply with the procedures described in the regulations are that the claimant can go directly to court and the plan loses the procedural benefits of making decsions through a valid claims procedure. Please elucidate about the fine.

But refund is not a remedy that can be provided by a plan document.

If the match is based on the 403(b) elective deferrals, the 403(b) plan is subject to ERISA.

State law contracting restrictions can be worse.

A fiduciary with limited responsibility should make sure that the specification of the limited duties is clear and in writing. Except for some of the extreme parts of the co-fiduciary rules, the limits on the duties should also provide limits on the liabilities to the same extent. If the limited cofiduciary knows of a material breach of fidciary duty by another fiduciary, the limited fiduciary has a duty to take appropriate action. It is unlikely that bad investment judgment or execution by the other fiduciary would impose a duty on the limited fiduciary to act, but it depends on the circumstances.

Would the university be so stupid or ignorant, by itself or with an incompetent advisor, that it would adopt a document that is designed for an ERISA plan and the document states that the plan will comply with ERISA or has a significant number of ERISA provisions in it? Don't bet me that it has not happened.

Someone is making a judgment about whether or not the distribution is necessary to prevent foreclosure. The process between a missed payment and foreclosure, and the time when it is reasonable to conclude that foreclousre will not be avoided another way, is complicated and lengthy. Someone also has to decide what amount is necessary to avoid foreclosure. Look at all the questions on the board about such details. The answers are not always easy or mechanical, despite the so-called safe harbor criteria. If decisions are made case-by-case, some fiduciary action is implicated. If you have such detailed guidance that you don't have to make any judgment calls, please share it with us. Many would be delighted to have the resource.

jpod: To explain your circumstances under my analysis, you are not determining that an order is qualified. As you report, you are advising the PA about qualification and the PA is making a determination of qualification in reliance to some degree on your opinion. You are not determining qualification. The order is not qualified or implemented until the PA acts (makes the determination). If your action were sufficient by itself to cause implementation of the order, you would be a fiduciary. For example, if you sent your letter directly to a Fidelity or Vanguard or other service provider for creation of the alternate payee's account and the PA was not the intermediary (with ability to disregard or countermand your conclusion or direction), you would be a fiduciary.

Yes, determination of qualification is a fiduciary function, but that does not mean the annuity provider should not provide the service. The provider can serve as a fiduciary for the limited purpose or it can provide the service under the supevision of the plan administrator without being a fiduciary. The relationship with the plan will be different because the plan administrator thinks (or should think, if the plan administrator has the ability, which is questionable becaue if the plan administrator had full ability to think, the plan adminitrator currently should be even more concerned about certainty of status than the provider) the QDRO stuff has been fully outsourced to the provider. Instead, the provider will be handling the matter and documentation subject to the approval of the plan administrator. The plan administrator will be relying on the provider as an adviser to assist the administrator in the administrator's fiduciary capacity rather than relying on the provider as a fiduciary responsible for the QDRO matters. The discussion assumes an ERISA plan.

Be very careful about the limitations on the relief. If a fund is actually created or described to participants, the exemption does not apply. Most cafeteria plan FSA arrangements fail to qualifiy for the exemption, but no one seems to care. Amounts that immediately pass through to cover insurance premiums are relatively safe. Any self-insured benefit arrangements need attention.