J Simmons

The Tise case, mentioned by QDROphile, suggests that maybe the statute provides an 18 month delay before payout to the employee may be made. There, Tise was trying to get a DRO that qualified. First, in 1991 a show cause order issued by the divorce court was presented to the ERISA plan. It was not a QDRO as it merely required notice (from the union, not the plan) to Tise's lawyer before paying benefits to the employee. A 1994 writ of execution follwed, specifying that $209,988.84 from the employee's benefits be paid by the plan to satisfy a judgment in Tise's favor. "At this point, Tise had only to obtain a QDRO, compliant with the statutory requirements, to enforce the interest created by the 1994 state court order." The plan, it was noted by the 9th Circuit, "should have determined whether the 1994 order was a QDRO, and, if the Plan concluded that it was not, allowed Tise to return to state court to secure a proper order--precisely what Tise was trying to do when [the employee] died." The employee died in early 1995. "At that time, the Plan was obliged to segregate the funds that would be due to Tise if her order was ultimately deemed to be a QDRO within the 18-month period for which ERISA provides. Only if Tise could not obtain an order determined to be a QDRO within 18 months would [the] death benefit become payable" to the employee's death beneficiary. "Because Tise had placed the plan on notice of her interest in [the] pension plan proceeds before [the employee's] death, the fact that he died before the QDRO issued is immaterial. Tise obtained her QDRO well within the 18-month period the statute provides for segregating funds for the alternate payee's benefit. Because she is therefore entitled to a share of [the employee's] pension plan proceeds as determined by the state court pursuant to state law, we affirm the district court's distribution of $323,438.85 from [the employees'] death benefit to Tise."

Moona's discomfort would certainly be justified. The one creditor that this exception would be negotiated with would likely be the biggest creditor, the one for which the participating employees have the most concern raiding the general assets of the employer and thus want this negotiated. And by eliminating such a creditor's ability to go after those modified Rabbi trust assets, you'd be decreasing the risk of forfeiture--likely below the substantial level.

Yes, but in so limiting the investment options, they might bear greater potential liability for investment underperformance vis-a-vis the other, eliminated company, than the employer currently might bear. Only if the existing contracts with the annuity/insurance companies give the employer that right. If it does, there could be liability associated for possible underperformance after the forced move. Also, you might be forcing surrender or transfer fees, back-end loads, etc. that will be assessed against the benefits that might not apply if those investments are allowed to remain where they are longer.

Dunno. Maybe in QDROphile's "reasonable time" for a QDRO-looking DRO to come forward. My comments were strictly procedural, not substantive.

See that attachment

Imagine that! Claims against the plan for benefits could be brought in state court or federal court, but could be removed by the plan to federal court. Claims against the plan administrator for breach of fiduciary duty would have to be brought in federal court (exclusive jurisdiction). Claims against the participant/spouse could be brought in the state divorce court for taking steps to subvert the property division then going on. The TRO would better have been directed at the participant/spouse, so that upon violation the state divorce court could hold the participant/spouse in contempt.

Thanks, Larry. I'm pretty certain now that there will be relief, at least to the extent specified in Notice 2009-3.

Can you expand on these, please? From that previously linked write-up, there is this paragraph: Section 514 of the Internal Revenue Code is the one to look at.

Yes, and only expenses incurred through August 30 for day care expenses otherwise eligible will qualify for reimbursement. The health care dependent mention was simply to note that it is the context where the whole year is ineligible if they turn that age mid-year. For day care expenses, they qualify if rendered in that year before the birthday.

Does your plan allow the plan administrator to declare interim valuation dates?

ERISA does preempt a state court TRO attempting to preclude an ERISA plan from paying benefits out to an EE. If necessary--that is, X's lawyer cannot be convinced as David Rigby suggests--then the plan might need to file in federal court for protection from the state court, its TRO and otherwise.

Debt-financed investments lead to unrelated business taxable income for an IRA. Real estate management--if the IRA does not hire a company to do that--can lead to unrelated business taxable income too. What you describe doesn't sound like it involves a situation of any personal use, by you or your family members, directly or indirectly. So you would likely not run into prohibited transaction issues unless there are other relevant factors. Actually, I'm a fan of IRAs investing in real estate. Navigating the unrelated business taxable income and prohibited transaction rules, either to help an IRA owner steer clear of tax problems or in helping to remedy (to the extent possible) a situation gone bad is a great source of revenue for me. I'm a fan of any tax savings angle handled correctly.

Your contrasting situation certainly sits much better in the 409A framework. If the ER so decides after the EE has terminated and thus forfeited any legal right or claim to the age 65 benefit, then the argument of a de facto acceleration fades. While the benefits "just happen to mirror the reduced percentage of regular retirement benefits that were provided for early retirement benefits provided under the prior-409A plan" does provide some nexus between the age 65 benefit and the new benefit, I think the real key is no decision before the EE actually terminated, forfeiting the age 65 benefit. However, that nexus might give rise to suspicions and that might put the ER in the awkward position of proving a negative: there was no decision/side agreement before the EE actually terminated, forfeiting the age 65 benefit.

Hi, Kate, For purposes of being a health care dependent, turning a specific age, like 19 or 25, during the year disqualifies health expenses for that dependent from qualifying for tax exclusion. However, for day care assistance purposes, the tax-free assistance can be for day care for an otherwise qualifying child up until his 13th birthday. IRC § 21(b)(1)(A).

BG5150, Now I know why you hide behind that mask and masquerade in a cape. Are you posting from Guantanamo or Abu Ghraib or the mountains along the Afghani-Pakistan border? What is your definition of 'torture'?

Hi, Chris, The securities question has serious implications. There's a forum on this board dedicated to Securities Law Aspects of Employee Benefit Plans. You might do some digging in the threads and posts there to get a 'lay of the land' understanding. Even then, before proceeding with the pooled investments, you ought to get a legal opinion.

It seems to me that short of a pattern, if it happens with even just one EE that the early retirement deal is cut before employment ends, you have a de facto acceleration contrary to 409A. Discretion re timing are the red death under 409A.

I would advise against payout until compliance corrections completed, except for any minimum required distributions if the participant is age 70 1/2 or older.

I know of nothing that would prevent the grace period tacked on to the end of the short plan year from being 2 1/2 months. However, short plan years are usually hard enough for the operations of the plan to deal with without the grace period. Is it worth complicating it further?

Take a look here

lip, You've probably sensed from the replies already posted in this thread that there are many factors to consider. The specific situation should be examined by an attorney, compared against plan language and the rules mentioned and other federal pension rules, and an opinion obtained before the plan makes any payment. At that, the plan administrator might want to consider interpleading into federal court the benefits in question if either the wife or the children will not consent in writing to the benefits going to the other as determined by the legal opinion.

Hey, ArkansasChris, I've bolded a portion of your OP-original post. Would you be truly pooling assets of separate plans or merely limiting each to the same underlying investments but directly investing the trust assets of each plan directly and separately in those underlying investments? If truly pooling--such as to get economies--you might run into some securities laws problems.

I like the piggybacking idea better than the separate plan one for the reasons stated in your post. With a Wellness Program, make sure that HIPAA nondiscrimination is not violated with respect to other aspects of the ER's plan. For HIPAA privacy, I'd suggest that the on-site clinic take the compliance steps required of both a health care provider and a plan functionary. By the way, if the nurse practitioner commits malpractice, is the ER possibly liable too for having selected the company to staff the on-site clinic?

Yes, it is true despite your different PPO coverage through your employer. The requirements for certain high-deductible health coverage (HDHC) only applies to the making of contributions to the HSA, not for non-taxable withdrawals from the HSA.

Does the ER only make its decision after the EE has in fact retired early (<65)?