Mike Preston

The nature of the question lays to rest your position. Or at least it should. As I understand it, the question revolves around the retroactive nature of the amendment, not the timing of such an amendment had it been made in 2002 (or late 2001). I will grant you that there is a possibility for a violation of 401(a)(4)-5 here. But it is so remote as to be ignorable unless the facts are truly egregious. So, you are right to mention it. But a whisper would be the right volume, IMNSHO. Can we show whispers in BB Code? Will you grant me the amendment's escape from the clutches of 1.401(a)(4)-5 if the amendment would have been copacetic had it been made in 2002?

Indeed. Retroactive increases, brought about by way of benefit formula, vesting increase, or accrual pattern (or anything else you can think of but I can't at this moment) are not uncommon. Look up the history of benefit increases, retroactively applied, to most of the multi-employer plans of this country when investment returns were "off the charts." Such an increase might go back a dozen, or more, years. To suggest that a retroactive increase could give rise to an amended 5500 is not consistent with what the IRS has required in the past. And, I hope, with what the IRS will require in the future.

In the case of a continuously employed individual, you are correct. If somebody were hired in 2002, terminated employment at the end of 2003 and reemployed at the beginning of 2006, then they would fully vest in 2007 would they not?

Nobody really knows the answer, although I completely understand your inclinations here. Would that it were there was a franchise of sorts that held sway over the IRS in matters such as these. I would, of course, be the first to apply. Alas, the IRS plays this hand pretty close to the vest (for obvious reasons) and I have yet to find anybody who would boast of such; even through the grapevine. However, the word on the street has always been that a gently worded request for abatement is likely to succeed. You can find such mentioned on this site with enough time devoted to searching for same. And it matters not one whit whether the request comes from a consultant or the plan sponsor, in my opinion. With that said, there is some comfort with the request coming from a consultant in that if the response is harsh, you can always engage another consultant or fire the first consultant and then send a second attempt at abatement to the IRS. I would think it a bit less likely to allow for two bites of this particular apple if you were to start with a letter from yourself. But whether that is enough to sway you to hire somebody for this task is no doubt subject to debate. Good luck.

Surely you jest.

If it is retroactively effective to all, how can it possibly be discriminatory?

401(a)(4)?

OK, great. Divorces and QDROs are, unfortunately, complicated. There are a number of ways to fashion marital settlements as they relate to pension benefits. As has already been discussed, you have a "separate interest" QDRO. It also appears that you have a "frozen separate interest" QDRO. By "frozen" I mean that *your* benefit does not change, no matter what happens to your ex-spouse's benefit after your divorce. This may very well be the normal way to determine separate interests under Texas law. It is *not* the normal way to determine separate interests in some other states. For example, in California (where I am), a separate interest QDRO will almost always be a "non-frozen" separate interest QDRO. In California, as the participant spouse ages, the non-participant spouse's interest automatically changes to reflect both the change in the benefit and, at the same time, the change in the percentage of the benefit that is considered to be marital property (in community property states, [Texas and California are both community property states] this is generally referred to as the community interest). In many cases, a "non-frozen" separate interest QDRO will result in the non-participant spouse receiving a larger benefit. However, this isn't true in all cases. In some cases, a "non-frozen" separate interest QDRO can result in the non-participant spouse receiving a smaller benefit. I wanted to know whether you had a frozen separate interest QDRO or a non-frozen separate interest QDRO, because it allows further comments to be more focused. Given that you have a frozen separate interest QDRO, you should be aware that when your ex-spouse retired has very little, if anything, to deal with your benefits in a typical situation. You were originally told in 1991 that you were entitled to benefits commencing in 2011 and that your QDRO was a frozen interest QDRO. Hence, it is highly likely that even if the plan allows you to commence benefits prior to the originally scheduled date of March, 2011, the plan will probably REDUCE your monthly benefit amount to account for the fact that you are starting them at an earlier age than anticipated. In this way, the present value of the total expected payout remains the same. That is, you don't gain or lose (and, more importantly from the plan's perspective, the plan does not gain or lose) from you commencing the benefit earlier than originally anticipated. Let me take a break here and recap what that means to you. You were originally told that your benefit would commence in 2011. You were originally told that your benefit would be a certain dollar amount per month beginning in 2011. Nothing has happened that would change those facts. You most certainly can still begin your benefits in 2011 at the originally anticipated amount. Now, based on some third-party communication from your ex-spouse, you have come to believe that you were entitled to commence your benefits earlier than 2011. So, my next question is: where in the QDRO does it say that should your ex-spouse retire before 2011 you can then commence your benefit at that time? And, perhaps more importantly, if the QDRO does, in fact, say that you can commence your benefit earlier than the originally expected date in 2011, what does it say will happen to the monthly benefit amount you will be entitled to? That is, how is the calculation of your monthly benefit amount modified to take into account the different commencement date? As you can see, there are many complications that arise when trying to weave through a QDRO's provisions and how they relate to the underlying plan's provisions. What masteff said is right on point: get information from the plan administrator as to what your benefit amount will be if commenced at various points in time. If you want to see if you were harmed by not being given the option to begin your benefits as early as they might have begun, ask the plan administrator to tell you what the earliest date was you could have received benefits and what the monthly benefit would have been had you commenced your benefit at that point. As masteff stated, you might want to inquire when the earliest date you can receive unreduced benefits is. Or, was. Good luck.

Can you clarify something for me? In one of your posts you mention that you know the 100% accrued benefit as of the date of the QDRO in 1991. I was asking that you multiply that number by 40% to determine what the 1991 QDRO indicated was your entitlement at your ex-spouse's age 65 and then compare that number to the number they gave you in 1996. Are they equal?

DMKK, what state are you in? What you are describing is generally referred to as a "separate interest" QDRO, not as a "separate account" QDRO. It is not uncommon to refer to your separate interest and your ex-spouse's separate interest as being, well, "separate". In this case, of course, it means a "separate interest" rather than a "separate account". Sorry for sounding a bit redundant. There are no general rules which apply to all participants and alternate payees that you and your ex-spouse find yourself in. This is because the "general rules" include a rule that says each plan can craft their own rules with respect to timing, etc. This might be good news for you or bad news for you. But it is news that nobody here can provide you with. Only somebody already familiar with the plan (such as the Plan Administrator) or somebody who agrees to become familiar with the plan on your behalf (such as a lawyer or a retirement plan consultant) can really answer your questions. In some cases, yes, you could be entitled to a lump sum to makeup for the amounts missed. In some cases, yes, you could be entitled to an interest adjustment. In other cases, no, you would not be entitled to either and must begin your payments solely on a prospective basis. If you must begin your payments solely on a prospective basis, it is even possible that you are not entitled to commence payment until your ex-spouse would have reached age 65. I know that you now believe that the Plan is in the process of allowing you to start immediately (about 3 and 2/3 years earlier than when your ex-spouse would have reached age 65). But it is possible that before all is said and done, they might remove that alternative. I know it isn't likely that they would end up removing that option, considering that they have already told you you can begin payments now, but until your payments actually commence, don't count, as they say, any chickens. I would be curious as to whether the $ amount of your separate interest in 1991 (what is referred to in your posts as your "40% interest") is the same $ amount that was communicated to you in 1996 when they told you what you were entitled to in 2011 when your ex-spouse turns 65. Are they the same number? If not, why not?

Nah. Besides, while that might be a nice acronym to steal into our domain, it refers to options.

You could just "prune" it back, no?

OK from my perspective. Nicely done, AAMOF. ;-)

We aim to please. ;-)

Did you mean "lesser"?

But he now lives in a different state. For all we know, the ex-spouse does, too. I'm not forcing Florida to recognize coverture. I'm allowing for the possibility that, once all of the facts are known, the result might be different from what you want it to be based on the facts you know now.

I think there is a middle ground here, simply because the individual involved is an administrator. He certainly doesn't want to create trouble for the plan because of his actions, right? If he voluntarily agrees to notify his ex-spouse and the attorney of the ex-spouse that he intends to take a hardship and that if there are any objections he would like to hear about them in advance and he lets the plan see a copy of that communication, then the plan is completely insulated. Why wouldn't he want to do this if the course of action is legit under the terms of the plan and is not potentially infringing on his ex-spouse's entitlement? I recognize it is voluntary. I recognize it might cause a few minutes of billable time on the part of the ex-spouse's attorney. But doesn't that have to be weighed against the potential legal squabble should the ex-spouse's attorney take umbrage after the hardship is a done deal?

Actually, IIRC, it is a "voluntary transfer". Which, for almost all purposes (other than some arcane 401(a)(4) issues) is identical in treatment to "rollover." A bit of history might make sense here. A voluntary transfer made much more sense in the days when folks were concerned about constructive receipt. Now, with constructive receipt issues pretty much gone the way of the dodo, the concepts of voluntary transfer and rollover have pretty much merged. But not completely.

jpod provided you with a cite. It is directly on point. And it does precisely what you say it does: it allows an employer that aggregates two plans together for 410(b) purposes to NOT aggregate them together for 416 purposes IF and ONLY IF the requirements of 416(g)(2)(A)(i)(II) are met. There really is no substitute for a careful reading of that sentence: "each other plan of the employer which enables any plan described in subclause (I) to meet the requirements of section 401(a)(4) or 410." Note that it isn't "each plan of the employer aggregated under 401(a)(4) or 410". The bar is higher. It not only has to be aggregated, but it must "enable" the other plan "to meet the requirements". If the requirements of 401(a)(4) and 410 are already met without aggregating the plan in question, what else can it mean? By that, I mean, shouldn't the section be worded differently if it means what you think it does? BTW, I disagree with your design alternative of making the top 20% election and then excluding the associates from all plans. It is much, much better to not make the 20% election if there are a smattering (it takes only a couple, in most cases) associates who would otherwise be NHCE's. This allows most of the associates to be treated as HCE's and, along with their "low benefits" greatly assists the ratios in the plan that provides benefits. This is true whether the associates plan is rich or poor, aggregated or not. If we make the assumption that whatever design we go with for the associates plan has to "work" on its own, then the mere fact that there are more HCE's in the overall ratio test for each rate group makes the non-associates plan much easier to pass. BTW, I go back and forth on the issue of having a demonstration in file that the ABT is satisfied without aggregating the associates plan. While that is certainly expedient for the client in deflecting this issue at a low level if brought up by an IRS reviewer. The fact is that it is not required because the ABT isn't subject to bifurcation in this way. At least, I can't find it in the ABT regs anywhere. Are we having fun, yet?

I don't disagree with many of your conclusions. The facts of this case will determine how much, if any, of the benefits remaining are subject to a coverture determination. Such a determination can give rise to precisely the circumstance I described and with which you obviously agree, based on the above. There is no question that the OP needs competent counsel who can advocate on his behalf. I'd be very interested in the precise facts and the eventual conclusion.

Aggregating (as required) under the ABT is not aggregating under 410(b) for purposes of determining whether the associates plan is a "helper" plan as to the coverage/non-discrimination rules. As you just indicated, in the vast majority of cases the plans, exclusive of the associates plan, would satisfy 410(b) just fine. The only reason the associates plan is included in the ABT is that it is required to be included pursuant to the rules for calculating the ABT. If, OTOH, the associates plan is required to be aggregated with the other plans for purposes of enabling the other plans to satisfy 410(b), then it is highly likely that the entire she-bang (technical term, that) would then be top-heavy. As indicated, if the associates plan does not stand on its own and is aggregated with the other plans in order to enable it to satisfy 410(b), then it is not required to be aggregated for TH purposes. Again, the ABT portion of all of this is irrelevant to the determination of RAG's and th minimums.

Of course the time rule is used more frequently in dealing with DB plans than with DC plans. I expect that this issue will become more front and center over time as DC plans replace DB plans as the primary vehicle for retirement savings. The alternative to the time rule is referred to as tracing here in California. I think there is little question but that 401(k) salary deferrals are almost universally treated as being subject to tracing. Once one invokes employer contributions/benefits, however, tracing can certainly give way to the time rule.

Oh, I understand the issue and I'm truly sorry that the way things are in most states is inconsistent with the way you would like them to be. But the fact is that in most states your pension benefits are considered to be "reachable" whether they were initially credited to you before, during or after your marriage. I know that isn't what you want to hear and yes, this allows judges to fashion what they refer to as "equitable" settlements with pension monies that you would prefer be beyond their reach. Whether you like it or not and whether mjb likes it or not, there are lots of cases out there that say one can not segregate pension benefits earned while in the employ of a specific employer by time period of "while married" from the time period "while not married". That is why many states call for formulas like "time while married and participating in plan divided by total time in plan" to determine community interest. Perhaps the most cited case here in California that highlights this issue is In re: Marriage of Lehman. You can read up on it by searching in google. There are literally dozens of places on the internet that cite that case. mjb is correct, however, that if the Court attempts to do things which aren't structured "just right" they may find that their efforts fail and can be reversed on appeal. Hence, you really need to get an attorney involved that can sort through all of this on your behalf, as the situation is far too complex for good advice to flow from here. The specifics of Florida and New Mexico law may have an impact on what is allowed that only an attorney familiar with the case law in both jurisdictions can sift through. If you want to read something on the internet that somewhat deals with this issue, see the following, which you can find at (you may need to sign in or create an account to see the whole thing): http://caselaw.lp.findlaw.com/scripts/getc...114&invol=1 This is a North Dakota case that affirms an out of state QDRO (from California) and allows precisely what you are complaining about: the modification of a QDRO by a court of competent jurisdiction that takes into account post-marriage increases in pension benefits. They do so based on an application of the "time rule". Good luck to you.

Reading is such a lost art. Didn't the OP say this was a corporation? What part of corporation and sole proprietor belong in the same thread? If 50k was the comp, then the profit sharing deduction available is 25% of that, or 12.5k, right? Assuming there was an election in place as of the date that the compensation was paid, the deferral is due. If it is late, calculate and pay the late amount pursuant to the DOL website and be done with it.

This is one of the major flaws to mail merges created with Word. What we have done is to print the whole shebang to single pdf file and then print each page of the pdf file (or each 2 pages if the letter is 2 pages, etc.) to a separate file, saved in the directory of the actual client, of course. Would that it were there was an easy way to automate this. You can use one of the various keyboard macro programs, but that is often more trouble than it is worth, as they are exceedingly tedious to set up and the slightest jiggle (such as a program kicking up in the middle of the routine and grabbing the focus) will render everything a big mess. I agree that an automated way to do this would be useful.