mbozek

IRC 414(p)(6) provides that the Plan admin shall determine whether a DRO is a QDRO after receipt of such order and notify the parcicipant and AP. Until the DRO is received the Plan adm. cannot take any action against the participants account. Under the Kennedy case and a Third circuit case, after the benefits have been paid out in accordance with the terms of the plan the AP can bring an action to recover benefits in state court. Question: Under what authority can the plan refuse to pay the 3,000? I dont know how the plan can refuse to pay funds due the particpant if the AP refuses to submit a DRO. As a practical matter the participant settled the AP's interest in the plan by using personal assets because the cost a QDRO would be not much less than the value of the AP's interest. And the AP accepted because the funds were paid sooner. Under the doctrine of unclean hands the AP could be barred from enforcing the DRO because she accepted an alternate form of payment in lieu of payment under the QDRO.

Most corp by laws provide that the president/CEO can sign documents that bind the corporation subject to ratification by the board at a later date. Reg. 1.401k-1(a)(3)(iii) provides that elective contributions can only be made for amounts that become currently available after the later of the date the employer adopts the CODA or the date on which the arrangement first becomes effective. Non elective contributions can be made before the plan is adopted. The question is when was the plan adopted? If the president had authority to adopt the plan prior to 8/1 subject to approval of the board at a later date (9/17) why werent the plan contributions on 8/1 made after the plan was adopted? This is a question that the employer's corporate counsel should answer about when the plan was adopted.

What was the effective date for adoption of the plan in the board resolution? Didnt the plan sponsor have an advisor who would explain that this problem could be avoided if the President/CFO signed document on 8/1/12 subject to subsequent board ratification?

Court can award legal fees in its discretion but it cannot order that the legal fees be included in the QDRO.

Only the general fiduciary rules for acting prudently paying reasonable plan expenses. In Tussey v. ABB Inc. a court held that among other imprudent acts the trustee and recordkeeper breached their fiduciary duty by transferring float income earned on plan assets to plan investment options rather than distributing it to plan participants. My own view is that given all of the scrutiny of plan expenses and fees paid by participants and litigators, plans should exercise an abundance of caution in determining how expenses are allocated to each participant's account. I do not think it would be prudent to allocate the admin costs incurred in directed brokerage accounts to those plan participants who do not utilize that investment option. See link to comments on ABB case: http://www.employeebenefitslawreport.com/2...ssey-v-abb-inc/

If the DC plan expenses solely to process the QDRO are $600 then that amount should be billed to the participant b/c otherwise the unbilled expense would be allocated among all of the other participant's accounts. Of course, employer could pay any QDRO costs not charged to participant. I dont believe that a plan should allocate a portion of the expense of a QDRO review to other participants who derive no benefit from this expense any more than the cost of processing plan loans or administering directed brokerage accounts should be allocated pro rata to the accounts of participants who do not use those services.

Carrots The question you have raised should be answered by the plan's drafter/counsel for the plan. The problem is whether under the plan language the participant's accrued benefit is to be treated as a DB benefit or DC benefit under 401(a)(9). DB distibution regs are 401(a)(9)-6, DC regs are -(a)(9)-5.

Please elucidate what you mean by QDRO admin fees. Some fees which pertain to a QDRO such as the cost to set up the account should not be charged if there is no charge to set up an account for a non QDRO beneficary. If the plan has an account admin fee that is charged to all non active employees then such a fee could be charged to an AP's account. Admin expenses to facilitate the valuation and division of the participant's assets to comply with the terms of the QDRO would be included in the fee billed to the participant. Fees that would not be charged to other beneficaries should not be included in the cost of the QDRO.

Price quotes vary depending on the difficulty in doing the computations, locale where the services are performed, type of plan, amount of work to be preformed, etc. I have reviewed QDROs where the parties wanted the DC plan administrator go determine last 6 years of valuation in multiple accounts in DC plan in order to retroactively divide up the plan assets. PA can either say no or come up with the value for the costs to be billed to the participant. One thing that needs to be recognized is that plan must be made whole for value of services performed by TPA/attorneys in determining the QDRO valuation.

why not ask the participant to roll the excess back to plan so as to eliminate need to report excess?

what does the plan say?

If the IRS refues to acqueiese then it is contradicting the language of Pub 509 as well as the literal language of IRC 7503. RR are not valid precedent to contradict an IRC provision. Pub 509: Saturday, Sunday, or legal holiday. Generally, if a due date for performing any act for tax purposes falls on a Saturday, Sunday, or legal holiday, the act is considered to be performed timely if it is performed no later than the next day that is not a Saturday, Sunday, or legal holiday. These calendars make this adjustment for Saturdays, Sundays, and federal legal holidays. But you must make any adjustments for statewide legal holidays. An exception to this rule for certain excise taxes is noted later under the Excise Tax Calendar. I really dont understand the need for 2 extra days to make the contibution but if they dont want the check to be deposited until the 18th then mail it to the trustee on the 15th by certifed mail.

IRC 430(j) (1) provides that due date for payments of any minimum contribution shall be 8 1/2 months after close of the plan year which is Sept 15. IRC 7503 extends the date for the contribution to Sept 17. IRS Pub 509 confirms that the time for performing any act under the IRC which falls on Sat, sun or Holiday to next business day. IRS caused confusion by issuing RR 83-116 limiting extenson only to filing of tax returns. We have had this discussion before and it boils down a rejection by the Tax Court of the IRS position in 83-116 that the extension of time permitted by 7503 applies only to the collection or refund of taxes, e.g., filing of a tax return. See E-B Grain Co v. Commissioner of IRS, 81 TC 70 and Synder v Commissioner of IRS, TC Memo 1981-216.

IRC 7503 extends the time for performing any act prescribed under the IRC which falls on a sat. sun or holiday to the next business day.

I thought that corps are required to file 1120 2 1/2 months after end of tax year with automatic 6 month extension which means that corp contribution must be made by 9/15 for calendar year plan. Self employed persons file 1040 returns on 4/15 which with 6 month extension requires PS payment to be made by 10/15. However DB/MP plan contribution for plan subject to ERISA must be made by 9/15 See IRS pub 560 P15.

fee quotes are available online and vary by locale. No need to ask. Just google qdro legal fees by attorneys. http://www.stanbeutlerjd.com/faq-fees.php http://www.qdro-law.com/fees/ or google QDRO plan administrators fees http://www.qdroplan.com/pages/AdminFees.html

Thanks, mbozek, that discussion is helpful. However, I really am looking for a copy of that article by Elinor Merl. If anyone knows where I can find it, please let me know. Why? Its 15 years old.

Isnt the a reality check on all of these options the requirement that distributions must commence at some date, either 65 or 70 1/2, for missing participants which means that after exhausting the 4 required options plan sponsors have to pay out the benefits under one of the following: 1. forfeit the benefits under IRS regs subject to restoring the funds in the unlikely event that the participant later appears 2. transfer the funds to a state abandoned property office which accepts the funds 3. transfer the entire account to a federally insured bank account after deducting 20% withholding. If these options are available when distributions must commence why cannot a plan use them before MRD to prevent reduction of participant's accounts to pay plan admin fees?

reg. 1.401(a)31-1 Q-16 provides that the plan admin is permitted to allow a direct rollover of a note for a plan loan to a qualified plan as part of a distribution. If the note is part of the distribution why cant it be rolled over?

I am actually looking for a copy of this article but most online archives don't seem to extend further back than 2000. Anyone able to direct me to a copy? Thanks! see link to recent discussion of taxation of plan loans of deceased employee. http://benefitslink.com/boards/index.php?showtopic=51842

After 5000+ posts, you don't know if the PBGC complies with tax law? https://www.pbgc.gov/workers-retirees/trans.../page16319.html

Plan did not sue ex because it would be an act of futility. According to the footnote at the bottom of P 5-6 Ms. Foster spent all of the 42k she received. Actions under ERISA are brought in equity (e.g., no jury trials) and plan can only recover specific plan assets that are in the possession of ex-spouse. Since Ex spent the distribution plan recovery would be bupkis -0. Same result if plan pays excess distribution to participant who has $1M in investment assets and loses the entire distribution in Vegas. No recovery because participant spent entire distribution. Plan is not required to waste assets in lawsuit if there is no possibility of recovering distribution.

Does the PBGC issue a 1099 when the benefit is distributed to the participant?

Why does the owner want to reduce his account balance? Why not deduct it as an employer expense in connection with the plan under reg. 1.404(a)-3(d)?

See link to statement of Phyllis Borzi testifying that investment education is important to participants. Scroll down to end to find statement on distinguishing education from advice. While there is no DOL requirement to provide investment education there have been statements by some commentators that providing investment education could be considered a fiduciry duty. I dont know of any case where a fiduciary has been sued for failure to provide investment education. http://www.dol.gov/ebsa/newsroom/ty072611.html