jpod

I can't speak for QDRO but if by "Options" you meant stock options we are a little confused as to what type of arrangement we are dealing with here, and that could be pertinent to our efforts to be helpful. Normally, we don't think of a stock option as a component of a NQDCP.

QDRO: Actually, it occurs to me that this arrangement is likely exempt from 457(f) under the 3121(w) "church" rules. My bad.

Why won't you be paying out the entire amount in a lump sum at the time of vesting so that the payment occurs at the same time as the amount is taxable under 457(f)?

QDRO: The facts are very vague here. On the one hand Eric described the plan as a NQDCP, which would suggest that there might be an ERISA preemption issue, but on the other hand he was talking about an assignment of the participants "options," which if he means stock options are generally not part of an ERISA plan and, therefore, no preemption. For what it's worth I think that in many jurisdictions stock options are considered property which can be split in a divorce, notwithstanding anti-assignment language (or why else would IRS have ruled on the tax issues a few years ago)

1. Clearly the QDRO rules of the IRC are inapplicable. 2. Unless it is an ERISA pension plan subject to part 2 of Title I of ERISA, the ERISA QDRO rules are inapplicable. 3. Assuming it is not an ERISA plan at all, and therefore there are no issues of ERISA preemption, the issue boils down to a State law issue of whether the court has the ability to do this. Assuming the order looks valid on its face, and there is no indication that the court was hoodwinked into believing that the plan is something other than what it really is, the client has to decide whether it is worthwhile to contest the order if the participant himself is not interested in contesting it.

I am assuming that the LLC did not make an election to be taxed as an association (i.e., as a corporation). You should check with your client to make sure that assumption is accurate, in which case the LLC is disregarded for tax purposes. To do your calculations correctly, you have to ignore the W-2. You also have to ignore the employer share of FICA taxes paid by the LLC, if any were paid. So, you start with the net income of the LLC as reported to you, add back the compensation reported on the W-2 and any employer FICA taxes paid. You end up what is essentially the earned income for this individual Schedule C filer, which is what he really should be. You do your calculations from that point as you would for any other Schedule C filer.

I believe the better practice is that neither the plan document nor the trust agreement (if there is a separate trust agreement) should take a position on the intention vis a vis 404c compliance. The disclosures pertinent to 404c should be made via a separate doc or set of docs.

Probably 7A.

I'm not sure what instructions you are looking at, but the instructions on the web page I see are very clear: the General Notice (either the full version or, if the individual is already enrolled in COBRA coverage) must go to every QB whose qualifying event was on/after 9/1/08. However, the Extended Election Notice goes only to AEIs.

Oriecat: Not true. DOL made it clear in webcast that the General Notice must go to all QBs. However, the Notice of Extended Election Periods need be sent only to AEIs.

Under the facts as you have described them, ERISA is inapplicable, so the ERISA "trust" requirement does not apply, and under the IRC it is sufficient if there is a bank or other IRS-approved institution as the custodian. If you don't have a qualifying custodian, you need a trust. I think the attorney is correct. I believe that there is an old IRS ruling or other guidance that confirms the "merger" analysis in the context of an IRC section 501(a) trust. The solution I have used is to make the spouse the trustee.

James B: If the employee accepted a voluntary early retirement package, even if there was looming fear of getting fired later, why should the employer stick its neck out and risk being accused of perjury and attempting to defraud the Federal gov't? If the employee's claim to the subsidy is denied, he can then appeal to the DOL, and if the DOL concludes that it was involuntary, the employer is off the hook!

Andy: Assuming as you do that this is not a proper expense for the plan (and I think you are correct), why are you not a party in interest and a disqualified person and if you are why are you not participating in a per se PT (if you cash the check)?

I think you're looking too hard at the trees and missing the forest. A CC can be a payment event only if it is a CC as defined in 409A (and the regs). If you are carving out a certain type of CC that would meet that definition so that it is not a payment event, what's the problem? It goes without saying that you can have a more restrictive definition of CC than the regs would permit, and we don't need anyone at IRS to tell us that, because the definitions in the regs establish floors, not ceilings.

Perhaps we need to know what happens to health care coverage during July and August, but putting that aside I would lean VERY heavily towards "involuntary" absent ARRA guidance from IRS or DOL to the contrary. The fact that there is a written contract, as opposed to an oral contract, is irrelevant, I think.

Your client needs to have all the facts so that it can weigh the choices: maintain prototype and be forced to contribute $X more for certain employees than it would have to do if it dropped out of prototype. There's nothing so terrible about going off prototype if it means avoiding a ludicrous 11(g) result.

no

J4FKBC: Bad example; IRS can take an unsupported position as long as it is not a detriment to any taxpayer, because nobody has standing to complain. Taking the position that a plan is subject to ERISA purports to effect the rights of participants and beneficiaries, and also to preempt the application of state law. So, the IRS position is meaningless when there is no basis for same.

they should be filed

Fisher: It's interesting that you have heard what you said you heard, because until the IRS revises its 410d regulation, there is no legal basis for the position that a 410d election has been made with respect to a church plan simply because the document contains ERISA-required provisions or refers to ERISA.

2 possible reasons to elect ERISA status (all of the merits or disadvantages are debatable): 1. To have ERISA preempt state laws that might otherwise be applicable. 2. If it's a DB pension plan, to have PBGC insurance protection. (Don't laugh; this is a valuable feature that may outweigh all of the associated downsides.)

I have not read this, but why would this law not be preempted by ERISA to the extent that it purports to regulate an employer whose plan is subject to ERISA?

You're right; the authors of this article seem to think that eligible means merely eligible. But I'm not so sure.

GMK: What have you read that tells you that eligible means merely eligible?

My preference for using DOLs' model notice is that I expect that they would resolve at least some of the interpretative issues in ARRA. For example, the subsidy is lost when someone becomes eligible for another plan. What is "eligible?" Does it mean actually enrolled (as the word has been defined for other COBRA purposes) or merely "eligible?" Also, as George noted, do we really have to send second chance notices to people who were not involuntarily terminated?