jpod

Janet, what do you suppose will be the basis for the IRS questioning the validity of the QDRO? Let's be precise because our guest, CDEsq., is looking for some help. If your opinion is that it doesn't smell right to you and that he should consult with an ERISA lawyer, I can accept that. But to suggest that he "might have a harder time" without stating why he would have a harder time is not helpful.

First, a marital settlement agreement is not enough to establish a QDRO; a judge needs to be involved. I am assuming by your handle that you are a lawyer involved in the case. Will you be able to find a sober State court judge to go along with all of this? If you do find one, I doubt that IRS would look beyond the 4 corners of the QDRO.

Interesting point about the partner not necessarily being a HCE in his/her first year with the firm (assuming he/she is not a 5% owner). I didn't think about that. I am assuming, although I don't know why, that this is a DC plan. Query, could you amend the plan to let this individiaul participate in the first year, and even provide for the full 415 contribution for the first year (if that's what he has negotiated), and then hold him out of the plan after the first year until he satisfies the plan's normal eligibility rule, and thereafter let him participate on the same basis as everyone else? Is the timing of this amendment discriminatory under the regs (because of the high likelihood that he will become an HCE in the future)? Food for thought. Even if you can do something like I've proposed vis a vis eligibility, I'm not sure how you give this individual service credit for vesting without a discrimination problem, because accelerated vesting will have an effect in subsequent years when he is an HCE.

I'm afraid I don't have the time or the inclination to study the 401a4 regs. for you, but I can't believe that this fact pattern escapes the regs. alive. You would not really be granting "past service;" you would be waiving the eligibility service and vesting service requirements, or liberalizing them, for a single HCE. I'm not sure if it is a BRF problem or another problem, but it's got to be a problem. Sorry I cannot be more helpful.

I think I can safely confirm that the employer has no legal basis to sit on the check. On the other hand, I'm not sure it's a good idea for her to be talking to her employer under the circumstances; let her mouthpiece do the talking.

David Rigby, I respectfully disagree. Before contacting your employer (I mean before your friend contacts the employer), get defense counsel.

Implicit in your question is the question of whether the employer can use "self-help" by taking your/your friend's 401k money, or sitting on the check as a means of pressuring you/your friend into repaying the amounts embezzled. The short answer is that unless the embezzlement involved an embezzlement of the plan in question, the employer should not be doing what you allege it is doing. Before trying to get medieval on the employer, however, you/your friend should seriously consider retaining criminal defense counsel.

Interesting problem. Did the employee sign a release of claims against the doctor as a condition of receiving the so-called "refund?" (I'd be very surprised if the doctor gave the money back so easily without asking for something in return.) If so, I would take the position that the expense was incurred, and the "refund" was a settlement of a separate claim by the employee against the doctor, so the $$ should NOT go back to the employer/plan. Can't imagine that the IRS would ever have any quarrel with that.

Check for any possibly pertinent plan language. If none, you may have a tricky question on your hands (at least its tricky if the beneficiaries under the will or intestate heirs are not inclined to let the spouse have the $$, but if all parties concern agree that the spouse should have the money it is a big yawn). Absent anything in the plan document, I'd be inclined to think that anything unpaid at death goes to the beneficiary under the plan, especialy when death occured only 2 days later.

One thing I would like to know is how did this case get to the S. Ct. without being settled for something between $0 and $150k? Who is paying the lawyers (or are they handling it for free for the privilege of appearing before the Court and the name recognition)? Are there other, similarly situated participants in LaRue's plan who filed complaints to toll the SOL and their cases are on hold pending the resolution of LaRue's case? Don't bother to speculate, but if you actually know the answers I'd be interested to hear them.

Thanks Steelerfan, I did mean Scalia. The typing fingers really outraced the brain in my post.

In my last sentence I meant to say "502(a)(1)(B)," not "502(a)(3)."

Thomas and Roberts got it right. The correct cause of action is and can only be 502(a)(2): restoring losses to the plan caused by a 409 breach. Once the loss is restored to the plan, it is then merely a function of the plan's investment and accounting procedures that the amount restored is allocated to LaRue's account. (Indeed, I think a different plan participant would have had standing to sue under 502(a)(2) in place of LaRue, but that's an issue for another day.) The next step is that LaRue files an applicaton for benefits and signs all the necessary consents (with his or her spouse's consent, if applicable). If the plan does not give LaRue his replenished account balance, he can follow the plan's claims procedures, etc., exhaust his administrative remedies, and if necessary bring a new lawsuit to recover beneits under 502(a)(3).

Thank you, Bird, for your thoughtful reply. By the way I agree 10,000.00% with the obervation in your 3rd paragraph.

I'll make the assumption that your goal is to be helpful and not merely critical (notwithstanding the sentence diagramming comment, which went over my head). With that assumption: RBD means "required beginning date." It's not relevant whether distributions actually started; what's relevant under 401(a)(9) is whether death occurred before or after the RBD. Yes it is a dc plan. Existing MRD provisions are in the form of the model amendment published in 2002, so they neither address the question nor present an obstacle. I don't understand the "why terminate" question, but in any event the issue you raise is not pertinent to the MRD questions.

I am looking for a sanity check. The facts are that Mom died with a one-person qualified plan after her RBD. Four adult children are equal designated beneficiaries. Nothing was done prior to death to suggest that "separate accounts" were established. 1. Can "separate accounts" be created post-death for purposes of allowing each beneficiary to use his/her life expectancy in calculating MRDs starting with the year after the year of death? My recollection is that you can create the separate accounts post mortem, and if you create them prior to the end of the year of death, the MRDs for the beneficiaries for the following year will be based on their respective life expectancies (rather than the oldest beneficiary's life expectancy). I think you can even do it as late as Sept. 30 following the year of death, but then your stuck with the oldest beneficiary's life exepectancy for the first year after the year of death. Do you agree with any of this? 2. Suppose the plan is amended for EGTRRA, etc., then terminated. Can we dispense with establishing "separate accounts" at the plan level and simply do direct rollovers to four IRAs (one for each beneficiary) and each beneficiary can use his/her life expectancy in calculating MRDs from the IRA? In other words, is the division of the qualified plan account into 4 equal shares in connection with the rollovers the equivalent of creating "separate accounts"?

Just Me: You're kidding, right? If I need $40,000 to pay for my kid's tuition/room and board, etc., you think I am better off taking a hardship of roughly $60,000 (more if I am younger than 59-1/2), rather than borrowing the money from a bank and paying it back as fast as possible with the money which I would otherwise defer into the NQ plan? (Use any dollar amounts you'd like, the concept is the same.)

I agree with QDRO. Plus, it must be some kind of goofy scenario in which a top-hat plan participant is so desparate that he or she needs to take (and pay taxes on) a 401k hardship w/d, then is able to afford NQ deferrals 6 months later.

Check the trust agreement? What needs to be done to commingle the assets, or at least to have them be recognized as funding one plan rather than two?

People, you really should look at the law first, and then come to the message board second (or third, or fourth . . .). The 403b citation provided by mjb identifies the qualified plan rules to which 403bs are subject. 416 is not one of the rules identified.

I can see your point about the rule as articulated in the text being confusing, but isn't the example that immediately follows the text crystal clear (that you look forward)?

bill Presson: You went backwards when you used the 2-month stub period. That is not what the regs require. However, I suppose it's no harm no foul as long as the individual got a year of vesting service for the 12-month period going backwards. But if he didn't have 1000 hours going backwards, you need to give him the opportunity to get that year of vesting service by looking forward.

I must assume that the plan is using the hours method (rather than elapsed time), otherwise the py would be irrelevant. What you must do (at a minimum) per the DOL regs. is to give the individual a YOS if he completes 1,000 in the 12-month period that begins with the 2-month short plan year, and then another YOS if he completes 1,000 in the first full calendar year plan year. You are essentially double-counting his hours during the 10 months following the 2-month short plan year. I suppose you could amend the plan to give everyone an automatic YOS for the 2-month short plan year, but I don't see the point of that.

A bar association can be a 501©(6) tax exempt trade association, in which case it would be subject to Section 457 (and might have a 457b plan).

Bird: The answer to your Q is "because it's a pain." Bad plan design. Allowing people to differentiate between regular pay and bonuses is sensible and reasonable, but not between normal pay and overtime pay.