Kirk Maldonado

Grabitquick: Would your answer about the 20% withholding apply if the payments to the ex-spouse were to be spread over more than 10 years?

Not if they were specializing in implementing Section 412(i) plans. (Fortunately, I've never been involved with one.)

I don't think that saying will be widely adopted by at least some of the employees of United Airlines.

The inability to locate long-gone participants if you should ever decide to terminate the plan (e.g., if the company is acquired)?

If you don't have enough expenses, I can generate whatever level of legal fees you need to consume all of the forfeitures.

I haven't researched it either, but I don't think you need constructive discharge. All you need to show is interference intended to thwart attainment of a right that the person may become entitled to under the plan.

Jon Chambers: If I were eligible to participant in such a plan I would drop out every even month and re-enroll in every odd month. I'd receive a great rate of matching contributions!

They only protect the person that applied for and got the ruling.

There are IRS rulings approving such arrangements.

I think that there is a bigger issue here than whether an audit is required for the Form 11-K. If your ERISA/securities counsel doesn't know the answer to this question, I would be very concerned about the quality of advice that you have been getting from that person. This is not a terribly sophisticated issue.

There is one thing that you can do to add some leverage on the person who received the inordinately large payment. Tell the recipient that, unless he or she repays the excess potion, the 1099 that you will issue to him or her will indicate that not all of the payment was eligible for rollover treatment. That 1099 would probably trigger an automatic IRS audit, assuming that the person rolled over the entire distribution. If that is true, unless that person is so masochistic that he or she likes to get into fights with the IRS where he or she will automatically lose, this should be enough to make him or her volulntarily repay the excess amount. To put the squeeze on the person even more, you can say that you will issue the 1099 in a very short time frame (e.g., one week) unless you receive the money by then. Also, I recommend that you demand that the person repay the excess amount plus interest. There's nothing like having an 800 pound gorilla (i.e., the IRS) backing you up to help you win disputes.

Mal: You raise a good point. The law expressly provides that court orders can require coverage of children. The fact that the law doesn't mention spouses may mean that the court order cannot mandate coverage of an ex-spouse (or soon to be ex-spouse). However, it has been many years since I looked at this issue, so it is quite possible that my recollection is faulty. If anybody disagrees with my thoughts, please post a correction.

I agree with everything that Sandra Pearce says, but I would like to add one other observation. People think that they are legally separated but that almost never occurs. To be legally separated, they have to get a court order. My understanding is that it is about as expensive to get a legal separation as a divorce, yet you are still married to the other person. My friend, who told me that, has been a domestic relations attorney for over 20 years and she has never seen a "legal separation."

Your client needs to hire a competent ERISA attorney who also understands securities laws.

PAX: Methinks the type of arrangement you are suggesting would violate the Americans with Disabilities Act. (Because certain disabled persons could never qualify for the "discount" so that they are necessarily charged for the coverage.)

The service spanning rules of the elapsed time method come into play here, requiring that the period of unemployment be treated as employment. See Treas. Regulation 1.410(a)-7. (Any time you only have a length of service requirement without also imposing a minimum number of hours component also, you automatically invoke the elapsed time rules.)

Isn't there a question as to whether the termination of the plan effected a full vesting of all participants that cannot be rescinded (depending on the wording of the plan dociument, SPD, and the adopting resolutions)?

Blinky: I agree that someone impersonating an actuary should be confined. But I don't think it should be a prison. An insane asylum would be more appropriate. Pax: For those of us non-actuaries, how often do EAs (enrolled actuaries, not enrolled agents) have to renew their enrollment certificate?

I want to clarify the last remark made by BeckyMiller. Compliance with Revenue Procedure 87-22 is only necessary if you are seeking a private letter ruling from the IRS that the sale to the ESOP will qualify for capital gains treatment so that the amounts received won't be treated as ordinary income. (This is a simplification of the legal issues involved.) It is very unusual to seek a PLR on that point. I don't recall ever having seen any. Also, many practitioners think that the conditions imposed by that Revenue Procedure are too burdensome, so that courts would not uphold them. In other words, they believe that the courts would allow persons who sold stock to an ESOP to get capital gains treatment even if they didn't comply with the dictates of that Revenue Procedure.

Does the plan expressly authorize those actions?

That is a a very fact specific determination, requiring an analysis of both federal and state laws. You need to retain an ESOP attorney that also understands the applicable securities laws. My experience is that most (pure) securities lawyers won't be of much help in this situation.

I disagree somewhat with QDROphile. I think a more appropriate result would be to pay the amounts to the estate of the alternate payee.

See Marsh v. Omaha Printing Co., 2000 U.S. App. LEXIS 15923 (8th Cir., July 12, 2000), which holds that the determination of whether the person is disabled must be made by the Social Security Administation, not by a doctor.

QDROPhile: I don't know if the original plan has to provide for in-kind distributions (which is a much bigger issue), but it clearly has to provide for the rollover of loans.

You should know that the mileage rate gets increased from time to time. I think that the current rate is in IRS Publication 502, which is on the IRS website.