J Simmons

The 8905 just puts the plan on a different cycle than if it were going to continue as an IDP. The intended prototype's amendment would not update the IDP before the prototype is adopted on behalf of the plan. They blew the deadline.

His U.S.-source income takes him outside the exclusion (i.e., if the minimum age and service conditions are met, he's eligible)--if in the plan you are dealing with it is written as allowed in the regs.

Ouch! Did you receive any notice of the 'mapping' of your funds into the 85% stock fund if you did not affirmatively elect your benefits be invested in some other investment option available through the new provider?

Just as in another thread it was noted that a group life policy is separate from the ERISA plan, here the group health coverage needs to be analyzed separate from the tax savings vehicle. An HRA that meets the provisions of 105(h) excludes the value of the coverage and the reimbusements for certain health expenses from the employee's taxable income. One of those requirements for an HRA that allows carryforward of unused benefits into future years is that it can only apply to employer contributions. (An HRA that allows employees to make tax-free paycheck contributions must also comport with the 125 and health FSA requirements, which do not permit such carryforwards.) Separate and apart from the tax requirements, there is underlying group health plan coverage that may be subject to HIPAA, COBRA, etc. The fact that the employer is promising and reimbursing employees for health expenses--whether or not in the form of an HRA to get the tax-savings--there is group health plan coverage that may be subject to these laws. The employee must be given the option to continue for a time that group health plan coverage if COBRA applies to the year coverage would otherwise end. The employer may insist that the employee pay up to 102% of the cost of the continued coverage. If it is a former EE that is no longer receiving paychecks from the employer, then the former EE has no tax-savings mechanism to use to pay for the cost of COBRA continued coverage. That does not mean that the EE cannot pay the ER with dollars (after-tax ones) for the continued coverage he must be allowed to elect. All of the terms of the HRA except the one about the ER bearing the expense would apply to the continued coverage.

I agree with George C. that it does not seem sensible for the prohibition on drawing premiums out of a health flex account under a cafeteria plan. If the funding is solely from the ER, you may have an HRA, a single pot of money that can be tapped for either health premiums expenses or out-of-pocket medical expenses. Since you can mix-and-match with tax-free money from an HRA for both types of health expenses, what is the rationale for not allowing mix-and-match of those health expenses from a single health flex account funded by EE paycheck reductions? Why must there be under a cafeteria plan a premium account separate from the health flex account?

What was the 'trigger' allowing the in-service distribution? If it was hardship, then I don't think that can be rolled over.

Can the plan administrator request the order be rewritten to show the losses allocable to the account once the order has been approved? The order does state that "the parties stipulate any .... order approving or incorporating the provisions of this order do not require the plan to provide increased benefits (determined on the basis of actuarial value)". It would seem that incorporating the provisions of the order would provide for increased benefits, although maybe not based on an acturial value. I would suggest that you send both the employee and ex-spouse a letter with the interpretation you intend to apply, explaining that it will be applied as soon as 45 days after your letter unless either objects or an amended QDRO is received that more clearly sets out a division different from that explained in your letter. There are regulations now that clearly provide for amended QDROs for yet undistributed benefits.

QDROphile's response was more precise than mine in that he mentioned that it is when the plan administrator is in receipt of a DRO (even before it is determined to be a QDRO) that the plan should put the hold on--which would include loan and hardship withdrawals--except to the extent such could be accommodated out of the portion of benefits that the DRO would not award to the putative alternate payee.

A Plan cannot act by itself. That's why it has an administrator. The administrator could hire someone to be an employee of the Plan, just as the administrator can hire, for example, an attorney to represent the plan's interests, not the administrator's interests. While an attorney is typically an independent contractor and if paid by the plan trust a 1099-MISC is issued by the plan trust to the attorney, if a service provider hired by the plan is an employee, the plan would issue that person a W-2. As Sieve pointed out, multiemployer plans sometimes have employees. Probably most compelling, however, is that Congress contemplated that employee benefit plans can have employees. In ERISA § 3(14)(A) as part of the definition of who may be a 'party in interest' for purposes of a prohibited transaction,

The OP states that the ER hired the employee. It does not say that the person was hired to be an employee of the ER or of the Plan. The ER did the hiring. It may have done so in a capacity as the administrator of the plan, and hired the person to be an EE of the Plan. The OP asks if the Plan should issue a W-2, which heightens the possibility that the OP contemplated the EE being employed by the Plan.

Not unless the ER has an agreement with the corporate trustee that it was responsible for keeping the plan documents updated, and not even then if the corporate trustee can show that it sent for the ER to sign all the right restatements and amendments at the right times.

ERISAnut, What provision of the Code makes 401a2 or 401a13 apply to a 403b plan? If the governmental entity is the 'plan administrator', can the governmental entity's hiring of the individual and supervising the EE not be for and on behalf of the plan as the ER rather than for the governmental entity itself as the employer? Iwonder, Is the governmental entity a public school? If not, it might not be an eligible 403b ER.

ERISA shouldn't apply because you state the ER is a local governmental entity (assuming it meets definition for ERISA exemption, such as taxing authority and election of controlling board by residents of geographical area). You posted in the 403b section and indicate that the ER hired this person just to work on the plan. So it sounds like the EE is not otherwise or already on the ER's payroll. Is the EE employed by the local governmental entity or by the plan? Since a 403b plan is not funded by a single trust but by group annuity contract, individual annuity contracts or individual mutual fund-only accounts, I'm a bit puzzled about the mechanics of how the funds will be drawn against the plan to pay this EE. Separate and apart from those concerns, the payment of benefits from a plan is not usually subject to FICA, but if a plan itself has an EE I know of no prohibition from paying FICA (in fact, I would think as the ER, the plan would be required to withhold FICA).

Nope.

Here is the weblink to the Hanbook for Attorneys (pages 93-118 being the most useful) and check Update Q&A. There are samples of clauses to effect different purposes. You cannot call it a QDRO. When you submit, you must submit a court-certified copy not only of the benefits splitting order (aka QDRO) but also of the divorce decree (with any attachments to it, such as a stipulation of the parties). The Office of Personnel Management (OPM) insists on court-certified copies of the underlying court order awarding the ex-spouse part of the benefits as part of a community/marital property division. You need to identify in a cover letter the SSNs and DOBs of both employee and ex-spouse. If the employee is retired, include the CSA number of the retiree. You must also certify to OPM that there have been no other court orders affecting the FERS benefits or the award of part as reflected in the court-certified documents you are submitting. More publications with info are available at OPM's Retirement and Insurance Publications. If your brother is eligible for FEHB coverage as well, that will not take effect until the benefits splitting order is deemed by OPM as acceptable by them. In the meantime, to prevent a gap in coverage, you ought to complete and file a Standard Form 2809 for Temporary Continuation Coverage.

First thing, check the plan document regarding what it provides about valuation dates. Some but not all are drafted so that the plan administrator may do interim valuation dates in its discretion. If so, I'd be careful not to do so in a fashion or way that favors HCEs. That could cause a BRF discrimination problem. For example, doing an interim valuation just before a NHCE distribution so that he/she suffers part of downswing in the stock market, but not having done so a month ago just before you paid out to an HCE based on 3/31/2008 valuation would be problematic. Some plan documents require daily valuations. Though not common, the plan document you are dealing with could call for something in between annual and daily valuations. Otherwise on your scenario, I would add the $3,000 (unadjusted for investment earnings/losses since made on 7/1/2008) to the 3/31/2008 balance ($0.00) for that employee. The $3,000 is deemed to have been made on 3/31/2008 if it was made by the due date (as may have been extended) on the contributing employer's tax return. If 3/31/2008 is the proper valuation date to be working from, that means that $3,000 is the dollar amount you should be working with.

Does anyone know what the COLA dollar values will be for 2009? or when such will be issued?

Yes, the new girlfriend/wife is one of those cash flow issues necessitating the QDRO and then money to the EE.

401(a)(4) testing breaks into three components: contributions, BRFs, and timing of amendments and termination. As for contributions, since these are matching contributions, the ACP test handles that. You do not have an amendment/termination timing issue. That leaves BRF testing which has been the subject of some of the responses already posted in the thread. 410(b) minimum coverage may be satisfied either by ratio percentage or average benefit percentage tests. The two-tiers for the match should not, of itself, complicate your ratio percentage testing.

If within 60 days of the QDRO payment to you from the 401k you pay an amount up to the QDRO payment amount into an IRA in your name, you will postpone the taxation. The 20% income tax withholding on the entire QDRO payment will be a credit in your favor against your income tax bill for the year (and may result in or add to your receiving a refund for the year). So, yes, you can roll the 'xtra' money into an IRA, provided you do it within the 60 day time frame. The only way you could avoid the 20% income tax withholding applying to the part you roll to an IRA is to have the 401k plan pay that part of your QDRO payment directly to the IRA custodian, and then withhold on the rest as is paid directly to you. You are correct about losing the QDRO exemption from the 10% early distribution penalty if you place the QDRO payment into an IRA and then withdraw from the IRA. That is, the 10% penalty will apply to later withdrawals from the IRA (unless you are then over age 59 1/2 years) as well as the income taxation.

The COBRA continued arrangement would not have the tax effects of an HRA, which are allowed only for ER contributions. But the 'group health plan' coverage that is COBRA continued would not have those tax attributes. Sort of akin to how insurance coverage paid for through a cafeteria plan on a pre-tax basis by active employees is continued per COBRA election, only the employee's payments are no longer tax-free. The coverage is continued and paid by the EE, not the tax angle for payments for the coverage.

But an ER may require COBRA participants pay for all of their coverage even though the ER is paying part or all of the load for active EEs. I think that the HRA opportunity must be extended to the COBRA participants, but only if they pay up to 102% of the cost. Since the COBRA participants would not get a tax deduction for such contributions, it generally would make no tax sense for them to do so. Since the HRA coverage might count as group health coverage, the COBRA participant may choose to pay for the HRA coverage so that it may be counted towards HIPAA special enrollment rights elimination periods when he or she might become eligible for another ER's health plan.

Quite the plan administrator--knowing nothing about QDROs! Yes, provided the plan permits such, and the employee met the criteria for the hardship. It would be problematic for the plan administrator to communicate with the spouse (not an AP if there's no QDRO) about what the employee may be withdrawing, unless and until presented an order--barring QJSA being the normal form of benefit under the plan and the benefits exceeding $5,000 in which case the spouse's consent would have been necessary for the employee to take the loan or the hardship withdrawal. No, and may violate the employee's rights if a stop is put on under such circumstances. See above. It might come as a surprise to the California courts, but ERISA is a federal law that defines the rights under an employee retirement plan, trumping state law. See the Boggs case.

Yes, but no catch-up salary deferrals.

Have I been cutting in line again? and it isn't even a queue for a general admission Rolling Stones show!