QDROphile

A well drafted plan will consider elective deferrals under other plans that count against the limit if the plan is advised of the other deferrals. That will allow designated catch up amounts that would otherwise exceed the section 402(g) limit. Even if the plan does not consider other amounts and treats the deferral as withn the lower limits, unless the plan is poorly drafted, the excess is still a catch up whether or not so designated. A well drafted plan will not depend on the "catch up" label.

Check your exposure to unrelated business income tax.

What you have is an interpretation problem. The plan does not know what it is to deliver to the alternate payee because of the odd twist that the participant can elect withholding. The solution is to require the order to speak to the withholding. If it does not, the order does not qualify because the plan cannot determine the amount payable to the alternate payee.

The plan does not care how money is ultimately used. The plan only cares that it is a domestic relations order (e.g. issued in connection with divorce) and meets qualification requirements. The plan can pay only an alternate payee. If the order provides for payment to a lawyer, or joint payment to a lawyer and alternate payee, then the order does not qualify. If the alternate payee pays to the lawyer all of the distribution from the plan to the alternate payee, that is not an issue for the plan. Otherwise the plan would be concerned with liquor and cigarettes. It does not matter if the court orders the alternate payee to pay the lawyer, but the order cannot give the lawyer an interest under the plan.

If something is an employee "benefit" and the employer can't provide just the "benefit" of allowing the employee to pay for the expense at the expense of the public fisc (compare section 125), then I don't see anywhere for the benefit to come from other than the employer. To put it another way, employers who are willing to subsidize bicycle commuting may do so, up to a point, without including the payments in the employee's income. The government thus joins the employer in the subsidy.

IRC section 132(f)(4)

Off the point, but what do think happened under those custodial agreements when there was no plan document adopted by the employer, and no further involvement by the employer in administrative documentation, which would have been the case for nongovernmental exempt arrangements? No plan document, therefore no hardship withdrawals?

The fourth paragraph under "Analysis" in Department of Labor Filed Assistance Bulletin No. 2007-02 says that employers may not make "determinations" with respect to hardship withdrawals or loans, among other things. That could mean simply administrative determinations under plan provisions that allow hardship withdrawals or loans, or it could be more prohibitive, given that most annuity contracts have provisions for hardship withdrawals and loans and the employer would be "interfering" with the contract and the administration of the contract. The sixth paragraph says that the DOL expects that an exempt arrangement would consist mainly of the TDA contracts provided by the annuity providers and the employer can adopt a plan document that "coordinates" administration among the different contract issuers. No mention that an employer can adopt a plan document that limits the terms of an annuity contract and still stay in the safe harbor of non-involvement. If the employer is completely risk averse, it should leave those elements of design and administration to the vendors, but make sure there are agreements with vendors for compliance, including coordination among the vendors. Personally, I think the Field Assistance Bulletin is both disingenuous and a nightmare for interpretation. I think it really means that the DOL just wants to look the other way rather than get into a new realm of enforcement. Meanwhile it provided a great disservice to those of us concerned with compliance issues (and who therefore are ill-suited to work in the 403(b) arena).

Sounded like a governmental plan to me, but maybe it was a private school.

The account could be held in a separate trust that is qualified under section 501(a) as a trust for assets of the plan. But I doubt that there would be any advantage to such an arrangement if done and maintained properly. Otherwise, the only way to get funds out of the plan's trust (where they are now) would be via distribution, if the participant is eligible, or a spin off of a portion of the plan. If what is proposed is simply a change of identity of the account beneficiary, no. You are correct that it would be an impermissible transfer of ownership.

State law, collective bargaining agreements, salary deferral rules, public scrutiny.

I discourage plans from providing model or sample orders. Good written QDRO procedures can be helpful to everyone.

There are other ways to skin the cat, but I applaud you for following Dirty Harry's advice and recognizing your own limitations. Rejecting the terms is the right course. But what is the plan administrator's policy about what is said in connection with advising that the terms of the draft order do not satisfy formal requirements? Will this lead to another failed attempt if the proponent is not given a clue? I am not at all suggesting that the plan should be helping with the terms of the order, but the plan could be wasting a lot of time if it plays tennis with someone who does not have an understanding of his/her own limitations.

Advice #1: Amend the plan and complain (or worse) to the person responsible for having plan terms that put the employer in such a predictable predicament. Advice #2: Have the plan fiduciary interpret the plan to achieve the practical result that only the available amounts after the applicable priority reductions are recognized for deferral. The plan terms give the ficduciary the authoruty to interpret, right? Advice #3: Don't rely on the advice of strangers.

Maybe this works: There is no requirement under section 403(b) to subject any amount to vesting.

It is OK if you like paying taxes. Not permitted if you want to comply with the rules. A further deferral requires a minimum five year postponement and the change has to be made a year in advance of the the original trigger.

Some plan fiduciary is responsible for QDRO administration, and may be the culprit unless FIdleity is refusing to follow instructions of the fiduciary. I think Fidleity has a service option that allows total outsourcing of QDRO administration, and that outsourcing should include appointment of a special fiduciary -- I don't know the relationship of the fiduciary to Fidelity. Masteff is correct that you need to get to the fiduciary who is responsible, otherwise Fidelity just hides behind its mechanical policies. No matter what the Fidelity policies, the appropriate fiduciary can instruct Fidelity to call off account restrictions. the plan sponsor is not necessarily the fiduciary, but it can identify the fiduciary.

Any plan provisions or policies that interfered should have been amended in connection with the transaction. It may not be too late to amend. Also, the fiduciary may have discretion over timing of default and contractual consequences of default and may be able to accommodate a prompt rollover.

mrstexas: Because you are dealing with Fidelity and typically Fidelity does not know the law and does not care to follow the law, I am not going to offer a detailed suggestion. If you cannot get state court orders to say exactly what the 900 pound goriila wants, you may have to resort to forcing the 18 month period to run on a requirement for disposition following a decision on qualification of an order. Unfortunately, the way to make the 18 months run is to trigger a distribution, but most people don't understand that. Once you tirgger a distribution, I don't know if you can stop it. But maybe you can bull your way to forcing Fidelity to release restrictions based on the 18 month rule and the determination that the orginal order was not qualified. You should also see if you can enlist support from the Department of Labor. Unfortunately, the DOL has its own problems with understanding the law and has some blinding biases that are not favorable to your quest.

The fiduciary can do what the fiduciary decides is comfortable. This fiduciary has had experiences that suggest that greater precaution is warranted. A fiduciary should take into account experience in making judgments, but I am not arguing that the fiduciary is required to arrange direct payment. What do you do about purchase of residence? It is better to pay the escrow agent. If the deal does not close, the fiduciary has no questions about receipt of the refund. It is about good plan administration, not paternalism.

You can do it, but it is sensitive and the plan needs to turn some square corners because of the anti-assignment rules.

The part that bothers me about the linked message is the hype, as if this is some new revolutionary change with tricks and traps. The proposed regulations brought some refinements, but nothing much has changed. We got some help with testing questions. Whether plans were compliant in the first place is another matter, but they probably did not go out of compliance with the terms of the proposed regulations. My favorite is up front. They make is sound like having a plan document is something new, big and surprising.

"Corrections are also typically outside of plan document terms."

The IRS starts with the request for documents from the beginning of time or the last determination letter. I have not yet been forced to see what happens if that cannot be done.

Would you be willing to respond to questions about what certain document terms mean, other than the correct response that the fiduciary is reponsible for interpreting the document? Putting your name on it means greater ownership. You probably get those questions anyway. Showing your brand is generally regarded as a good.