QDROphile

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?

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.