mbozek

Would there be any 411(d)(6) issues with adding a new condition for receiving the distribution?

Are you saying that a plan cannot condition payment of benefits to a beneficiary on being required to repay the funds if the beneficiay is determined later not to be the rightful payee under law? There is plenty of case law that has allowed plans to recover benefits paid to the wrong party under the doctrine of unjust enrichment since ERISA is a law of equity. Is this any different from requiring competing beneficiaries who agree to share the distribution to waive their claims to additional benefits under any future action?

If the person receiving the benefits is not legally entitled to payment what new condition is added by making payment subject to indemnification since the party receiving the benefits is not the beneficiary designated under the plan?

An individual claiming to be a deceased participant's beneficiary is making a claim for a death benefit under a plan. For reasons I'd rather not get into, there is some question whether this individual is the rightful beneficiary. With that said, there is some evidence that they have a valid claim...enough where I think the plan administrator's decision to pay the benefit would be considered to be reasonable if this ever made its way to court.

Could the plan administrator require the beneficiary to execute an indemnification agreement where the individual agrees to reimburse the plan for the amount paid if another individual makes a claim for the same benefit and it is conclusively determined that the second claimant was the rightful beneficiary? We're talking about a relatively small payout, so interpleader is not a cost effective solution.

The plan can condition payment of the benefits upon indemnification if some one else is deemed to be the rightful heir since it is not prudent for the plan to be put at risk of paying the same benefits twice. If amount of the benefit is too small for interpleader to be cost effective plan can pay on condition of being indemnified by the beneficiary. The problem is that the beneficiary may not be able to be located or may not be able to pay back the benefits.

I was married for 21 years and that ended in divorce. I have a QDRO from that marriage which entitles me to half of my ex spouses retirement account.. PERS to be specific, we lived and Divorced in Nevada...

I am remarried and unfortunately looking like facing another divorce, this time I was married and live in Oklahoma... My current spouse is trying to tell me that he is entitled to half of my half of my QRDO from my previous decree. Is he correct? From what I read, he is not, nor can I even leave this monies to my own children, from what I can tell, if I die, then all my QDRO monies returns to its original owner, my ex spouse... and I can leave no beneficiaries.. My ex is not retired yet, and is not eligible to retire for 4 more years without penalty...

Thanks for any assistance in advance...

There are two seperate issues that need to be answered.

1. Who can receive benefits under the QDRO for your ex's benefit. Only Nevada PERS can tell you what the rules are. If your first ex's benefits are payable to you alone then it is highly unlikely that PERS will agree to pay some one else with you.

2. Are the QDRO benefits part of maritial property which can be divided in divorce? This is determined by OK law. However most states that have equitable distribution law for divorce (where the court divides the property of both spouses without regard to who legally owns it) can only equitably divide property acquired during the marriage. In otherwords your PERS benefits payable under the QDRO were acquired before your present marriage and are not subject to division by an OK court in divorce. If OK law applies the separate property rule instead of equitable distribution then your QDRO benefits and any other property held only in your name will be exempt from division in divorce. Few states apply separate property to divorce.

EDIT: OK is an equitable distribution state and property acquired before the marriage is not subject to equitable distribution. your pension benefits payable under the QDRO are not subject to division by the divorce court. You can google "Oklahoma Division of property in divorce" for an explaination.

You need consult with a divorce lawyer to determine what rules apply to your case.

Company X changed health insurance carriers on 1/1/11. They did not send in a termination notice until 2/15/11...so from 1/1 to 2/15 they had 2 insurance companies. Old insurance A, and new insurance B. The old insurance termination date that was requested was 1/1/11. However, insurance company A terminated the insurance on 3/1/11 saying the termination letter was not sent in a timely manner.

Some employees used the old insurance cards claims were made with insurance A. Insurance B is willing to pay these claims...but the claims have been marked as paid.

Insurance A will NOT subrogate the claims.

So, Company X is left in collections for 2 months of unpaid premiums to Insurance A.

Anything they can do? State of PA.

This is a contract problem due to the failure of company A to provide notice of termination of the contract to Insurance A. Absent any provision in the contract that would invalidate the contract with A (e.g., entering into a contract with another insurer at the same time as the contract with A is in effect), X is liable to Insurance A for Jan and Feb premiums. See if Co B would give a partial rebate for Jan and Feb since Co A is paying some claims incurred in those months.

Thanks GMK - since the accrued benefit is not in pay status it doesn't look like the state can require the sponsor to issue a distribution to the requesting agency. I will advise the client -

If the claim is being made by a state child support agency, then the plan administrator has the obligation to pay the 401k benefits to the state agency under 42 USC 666(b) if benefits are in pay status. What needs to be reviewed is whether the benefits are in pay status and can be paid since the participant has terminated employment and distributions from a 401k are available after termination. It may also be possible that the state agency can impose a lien on the participant's benefit which will require payment to it when the participant requests a distribution.

Since the payment by the plan directly to the state agency is required under federal law, preemption of state law under ERISA is not available as a defense.

If the Plan administrator does not pay the benefits owed to the state agency under 42 USC 666(b), then the employer will be liable to the state agencey for the amount of child support.

Client under age 59-1/2 has real estate in a PSP encumbered by a mortgage. Value of real estate has fallen to below what the mortgage balance is. CPA suggests a premature distribution of BOTH the real estate and the mortgage. Since there is no equity, he proposes that the taxable amount of the premature distribution is $0. Thus there is no premature distribution penalty either. The reason for doing this is to gain some tax advantages in the negative cash flow if the real estate is held personally, rather than in the plan.

It doesn't appear that this distribution would be a prohibited transaction. Anybody see any problems with this?

If the FMV of the property is 0 then that is what should be reported on the 1099 but deducting the outstanding mortgage is an accounting Q. Check instructions for 5329 form. However, assets held in a Q plan are subject to UBIT if they are debt financed. See Pub 598, P 14. If the client's account in PSP was receiving income over $1000 per year from the debt financed property UBIT may have applied.

No. They are exempt from ERISA.

That is not correct. ERISA exempts non profit 457 plans from the vesting, funding, eligibility and the fiduciary (including bonding) requirements of Parts 2,3, and 4 of Title I. They are exempt from the annual reporting and disclosure requirements of Part 1 such as 5500 and SPD if a notice is filed with the EBSA within 120 days of the date the plan was established. Otherwise the R and D requirements must be complied with.

However, a NP 457 plan is not exempt from Part 5 of Title I of ERISA and is subject to the claims provisions/preemption since it is a pension plan established to provide benefits after termination of employment under Section 3(2) of ERISA.

Masteff, thanks for your reply - I assume the "cease fire" is tongue in cheek, as there's certainly no rancor here - just professional discourse.

The reason I'm trying to be so precise is this: I've found that Mbozek is usually right and I value his comments, so if he's disagreeing with me, I take that very seriously, and want to "drill down" to the core of the discussion to make sure that, as you say, we are on the same page. And the following makes me think that we aren't, so if I'm wrong, I just want to understand why.

"1. where the the IRA owner paid the ex spouse an amount in cash directly from the IRA, i.e. she received a distribution paid in her name from H's IRA account. According to the IRS the tax is paid the by IRA owner because it does not come within the exception cited in Pub 590. PLR 9422060 and 8820086."

So MB, if my wife and I get divorced, and the decree says I must pay her $10,000 from my IRA, and the divorce decree doesn't specify that this will be accomplished via a trustee to trustee transfer to an IRA in her name and she just wants the cash - if paid directly to her as specified in the divorce decree, am I going to get taxed, or is she? And if you believe that I'm the one who will be taxed in this situation, do you still think those PLR citations are the appropriate citations, or are there others that you are aware of? (and FWIW, I agree with everything else you have said - it's just that this specific question has me bamboozled.) Many thanks!!

The only way to transfer IRA assets to an ex spouse under a divorce decree or separation agreement which does not result in taxation to the IRA owner under the assignment of interest rule (which applies to all other IRA distributions to another party) is to follow the procedures to effectuate a trustee to trustee transfer of IRA funds from the owners IRA to an IRA of the ex spouse as stated on P. 28 of Pub 590. Any other transfers from the owner IRA to the ex will result in taxation of the IRA owner. In Jones v. IRS,TC memo 2000-219 an IRA owner who received a distribution from his IRA and endorsed the check to his spouse was taxed on the distribution because he failed to satisfy the requirement for a non taxable transfer under IRC 408(d)(6).

My question is why would an IRA owner take a risk of taxation by transferring an interest in his IRA to his ex spouse outside of the clear path to a non taxable transfer stated in IRS pub 590.

Mbozek - I'm a little confused - I think we are agreeing. What I took Qdrophile's response to mean, and with which I agree, is that if (a) you have a settlement that is to be paid directly to the ex-spouse, and not to an IRA on her behalf (the original post stated it was to be paid directly to her) and (b) that settlement is a result of a divorce, presumably a divorce decree, then I think the income tax and applicable penalty tax is payable by the recipient. I don't disagree with your assertion that it can be split into another IRA, but I took the "paid directly to her" to mean that she would receive a cash distribution.

Do you agree, or do you think this is incorrect? Thanks.

I think the OP gave two different possibities:

1. where the the IRA owner paid the ex spouse an amount in cash directly from the IRA, i.e. she received a distribution paid in her name from H's IRA account. According to the IRS the tax is paid the by IRA owner because it does not come within the exception cited in Pub 590. PLR 9422060 and 8820086.

2. where the funds were routed through the IRA in the ex spouse's name. I assumed that in # 2 he meant that the IRA funds were transferred to the ex spouse from the custodian of H's IRA to the custodian of the Ex's IRA in tax free transfer as permitted in Pub 590, P28. (H could also elect to have his IRA retitled in his ex spouse's name). If H's IRA funds are routed the ex spouse in another manner such as by giving her a check drawn from his IRA payable to her IRA H will have made a taxable distribution.

If an asset in the divorce that is to be divided is an IRA of the husband, does the spouse avoid the 10% early distribution penalty if the amount is paid directly to her from the husband's IRA?

If instead it is routed through an IRA in the spouse's name, does the 10% penalty then apply when she takes the withdrawal from her own IRA?

She is under age 59 1/2 years.

I dont know what the other posters were referring to in their comments but pursuant to a divorce decree or separation agreement some or all of H's IRA account can be transferred by H's custodian to the custodian of W's IRA without incurring any tax or penalty. See Pub 590 P 28. After the funds are transferred to W's IRA she will be subject to the 10% penalty tax on premature withdrawals. The transfer is effectuated by inserting a provision in the divorce decree or property settlement agreement ordering the transfer of X dollars/% from X's IRA to an IRA established by W. H's custodian must be notified by sending the divorce decree to his custodian along with instructions of how to transfer the funds to W's IRA.

If H pays W the amount ordered by the divorce decree/property settlement directly to W from his IRA H will be taxed on the transfer and will be subject to the 10% penalty tax. There is no rollover option for IRAs which allows H to write a check from his IRA to W's IRA which W can deposit in her IRA without H being assessed tax on account of a distribution.

Transfers to an ex spouse from an IRA are not subject to the QDRO requirements. Distributions of plan benefits to an ex spouse under a QDRO can be rolled over to her IRA. See IRS pub 590 P 27.

401k plan with directed investment. The two owners (naturally) purchased investment in Canadian gold maple leaf coins. Does anyone know if this meets the exception provided in 408m (I think that's the section). If not, this would be a distribution, correct?

As noted IRS pub 590 limits a participant's retirement plan investment in gold to US coins to and gold bullion. Any other participant directed investments in gold are deemed a taxable distribution in the year invested subject to income tax and the 10% penalty.

Question regarding a participant who has After-Tax money in their Profit Sharing Plan:

A participant is retiring and rolling their balance into an IRA. If for example over the years they have contributed $100,000 of after-tax dollars and now there is a balance of $500,000 in their after-tax account ($400,000 in earnings); can the participant take the $100,000 of after-tax money as a distribution and roll the $400,000 of earnings into the IRA?

Thanks in advance for your help.

There are at lest 4 ways to retain the post 86 AT funds received as part of a distribution without paying any tax on the pre tax funds.

1. If the plan permits, make a direct rollover of all pre tax funds to an IRA. Under IRC 402©(2) the first distribution is deemed to be from pre tax amounts. See Pub 575, P 26. At a later time, such as the next year withdraw the AT funds.

2. If the plan permits, receive a distribution of the AT funds and attributable earnings. Under IRC 72(d)(2) this distribution is permitted to be rolled over because it is a separate contract. Only the pre tax earnings will be subject to the 20% withholding tax which can be paid from the AT amount and the amount withheld can be recovered by lowering W-2 withholding or a refund when the tax return is filed.

3. If 1 or 2 are not available receive a distribution of the pre tax and AT funds and pay the 20% witholding tax on the pre tax amount. As long as the pre tax funds and an amount equal to the taxes withheld are rolled over to an IRA within 60 days of the distribution, the entire AT amount can be retained. See Notice 2009-68. The amount withheld can be recovered when the tax return is filed.

4. Elect a direct rollover to an IRA of both pre and AT amounts and then later in the year roll the pre tax funds to another Qual plan. In the following year the AT funds can be removed from the IRA without tax and any earnings can be rolled over to an IRA if there are no other traditional IRAs subject to the Pro rata rule.

All of the above options are complicated and require the assistance of a tax advisor and a review of the plan provisions with the plan admin.

Have several clients with IRAs. Their IRA custodian has just been indicted for operating a ponzi scheme. Government is searching for assets. Would clients' IRAs be subject to government forfeiture?

You need to provide more information on what assets the government is searching for and whether they were innocent investors or insiders. If the clients invested IRA assets in the Ponzi scheme, recovery of their losses on their investment will be subject to whatever the bankruptcy trustee collects on their behalf. However if the clients profited from the Ponzi scheme then they may have to give back their profits. For example, in the Madoff ponzi scheme some innocent investors received more in total distributions than they paid into the Madoff fund as an investment The trustee is seeking a return of the excess funds on the basis of equity, i.e., the recovery of all investors should be treated equally based on the amount they invested. Other Madoff inside investors received returns of 50% or more per year on their principal and the trustee claims that they should have known that the payments were from a Ponzi scheme and not a legitimate investment. Google litigation on Sterling investments and Stanley Chais.

The clients would also be required to repay distributions received that were a "fraudlent conveyance" or a voidable transfer under the bankruptcy law. The statute of limitations for commencing an action for a fraudlent conveyance is 2 years from the bankruptcy filing while the s/l for a voidable preference is only 90 days.

What government agency is looking for assets? Is it the bankruptcy trustee, the SEC, SIPC?

Note: state laws that protect IRA assets from creditors claims do not apply to a fraudlent conveyance. I dont know about claims for recovery made by the bankruptcy trustee under a claim of equity or another government official.

Client wants to deposit set amount now and use whatever amount that is in excess over the minimum required amount for 2011 (undetermined at this time) towards any 2012 minimum required contribution. Doable?

Assume it fits within the deductible range permitted for 2011 & 2012.

Under IRC 404(a)(6) all contributions are deductable on a cash basis for the tax year in which the contribution is made or for contributions made no later than the date for filing the tax return for the tax year. Rev Rul 76-28. According to Pub 560 the deductible amount cannot exceed the plan's unfunded liability.

Excess non deductible contributions can be carried over and deducted in a subsequent tax year but will be subect to the 10% penalty tax on non deductible contributions. Excess contribution tax can be eliminated by withdrawing the excess amounts before the date for filing the tax return or deduction of the excess contributions in a later year.

If the client contributes the funds in 2011 the only way they will be deductible in 2012 is if the contrbutions exceed the unfundied liability in 2011 but the excess will be subject to the 10% penaly tax in 2011. See Form 5330. If the client contributes all the funds at the beginning of 2012 the client can deduct the maximum deduction permited for 2011 and the excess can be deducted on the 2012 return without any excess contributions tax.

We don't do much with either DBs or church plans, so I'm really out of my element here. I don't believe that participants under a non-electing DB church plan would be protected from creditors because they aren't under ERISA. But just because it seems logical to me doesn't make it so. I also found an earlier link that said a church plan isn't covered by the PBGC either. Is that true whether or not they chose to be an ERISA plan, or would an ERISA church plan be required to pay PBGC premiums? Your help is appreciated.

There are two separate classes of creditors. If the church plan is qualified under IRC 401(a) then the benefits of participants cannot be seized by a bankruptcy creditor.

If the participant is sued by a judgment creditor on a non bankruptcy claim the retirement benefits will be protected from such a creditor if state law does not permit seizure of pension benefits by a creditor or if the plan contains a spendthrift provision not allowing seizure of a participant's benefits by a creditor.

Besides the plan document is there another source that lists out what a 401K / Profit Sharing Plan is allowed to invest in? I've been asked a lot lately about participants being able to invest in everything from gold to buying a farm inside a 401K plan. The plan document does not seem to be very specific in identifying what types of investments are permissable. I know the annual valuation requirement can cause some problems for some types of investments but is there anything published by the IRS or DOL that discusses what types of investments are generally allowed/disallowed in a 401K plan?

Thanks!!

You need to review the restrictions in the PT rules of IRC 4975, specifically an employee using a 401k account to purchase a business in which he or she owns more than 50% interest. See Flahertys Arden Bowl Inc v. Comm, 115 TC 269 (2000). Or loaning his /her plan assets to a family member.

There are several IRA custodians who will accept non traditional assets such as Entrust or Delaware Charter but the annual fees are steep, e.g., $800+ and the custodians disclaim any responsibility for insuring compliance with the IRC 4975 rules. Google "non traditional IRA custodian or IRA alternative investments" to find the links. Most custodians have an approved IRA document that allows the use of non traditional assets. While an IRA can loan money to an unrelated third party, some family mermbers such as, spouses, parents and children are parties in interest. However, siblings are not parties in interest. Need to check IRC 4975 to find out if loan is a PT. Best thing to do is to put loan in a separate IRA so as not to contaminate other IRA assets.

I think that this issue relates to PLR 200704005 and the related investigations done by the FSLG Division of the IRS. It was reported in their Newsletter July 2006 and followed up in 2008. They seemed to have entered into a closing agreement with the provider resolving the tax issues of more than 500 governmental entities.

I recall but cannot find, the Notiice that was put out. The plan design that I recall as being in question involved an HRA related to a VEBA. They did not say who this provider was but there are not many who fit the size parameter.

You might get more or better info if you post your question onn other Forums such as VEBAs or Health Plans.

This presentation from the IRS seemed to be related, starting on page 10. Still no mention of the provider or participants.

Under IRS privacy laws all identifiying information of the taxpayer is deleted in a PLR.

The date of payment of the RMD is the date the check is mailed by the plan adminstrator or trustee, not the date on the check.

So, a check with a date of April 1, 2011 that is mailed by the bank on April 2 would be in violation?

If a Plan makes payment as of the end of the month, then would your explanation mean that a check dated April 30 that is mailed March 31 is okay? If not, then the Plan would need to have the pension start March 31 and mail the check prior to this date.

Under IRS rules the check is deemed received on the date it mailed/postmarked at the PO, the same as a tax return is deemed filed on the date is mailed/postmarked. It will also be received on the date is sent electronically. If the check dated April 1 is mailed on April 2 it will be a timely MRD if April 1 is a Sunday.

I dont understand why a plan would send a post dated check that could not be cashed for 30 days, since the check would be taxable in 2011 regardless of when it is cashed. The IRS rules deem the check to be received on the date is is mailed out, subject of course, to collection of the funds by the participant. I dont know whether a post dated check would be legal under the banking laws.

Why cant the plan mail the check for the MRD due April 1 on the last business day in March like any normal business?

The DB Plan says to start the pension on April 1 following . . .

The election package gets completed by the end of February and is submitted to the Bank for processing. The initial monthly pension check is not cut until April 11, 2011. Have the RMD rules been violated?

Suppose this were April 1, 2012 which is a Sunday, and so the check is not dated until April 2, 2012. Have the RMD rules been violated?

As a practical matter, the rules have been complied with. Has anyone have experience or knowledge to the contrary?

Rules for DB commencement:

Reg. 1.401(a)(9)-6 Q/A-1© Annuity payments must commence on or before the employee's RBD (April 1 of the calendar year following the year in which the employee attained 70 1/2).

Under the IRC if the date for performing an act under the IRC falls on a Saturday, Sunday or a holiday the date for performance is extended until next business day. The date of payment of the RMD is the date the check is mailed by the plan adminstrator or trustee, not the date on the check.

I am finding it difficult to locate consistent rulings on the Contract Clause and its application to governmental pension plans.

Specifically, I have seen some discussion on this board that many states protect from impairment of future benefit accruals. I am wondering whether a government who has reserved the right to amend and terminate the plan may reduce or eliminate benefits to be accrued in the future? (See Southeastern Pennsylvania Transportation Authority, 145 F.3d 619.) It appears to me that they can in the state of Maryland, for example, regardless of whether the employee is vested or not. The Maryland cases that I have seen say that pension plans create a contractual relationship with vested participants, and they say further that there is no issue with any plan amendment that does not reduce or diminish accrued benefits (i.e., a prospective amendment). I am over-generalizing a complex issue, but I am wondering if anyone has any thoughts on whether the government can reduce or eliminate future accruals in a governmental pension plan? Citations are appreciated.

I think this may other issues under IRC Section 401(a)(7).... do the partial termination rules apply to governmental plans?

If permitted under state law and the sponsoring employer has reserved the right to terminate the plan at any time then future benefit accrual can be eliminated after the plan is terminated. You will have to check the state consitution or case law for the state in question to see if there are any restrictions on eliminating benefits. For example, the NY state constitution prohibits the reduction of benefit accrual after an employee becomes eligible to participate in a public employer retirement plan. This has been applied to prohibit a reduction in future benefit accrual by a state employee.

You can google "Public Pension Plan Refom: The Legal Framework" by Amy B. Monahan for a good survey of the retirement plans for public employees in all 50 states. According the article only about 24 states have any case law or state constitution provisions that answer the question of whether public employee retirement benefits can be eliminated or reduced prospectively or retroactively.

However there are lawsuits pending in MN and CO on recent state legislation which will reduce the cost of liviing increases paid under the state pension plan in future years to state retirees receiving benefits, even though there will be no reduction in the current benefits paid to the retirees. The retirees claim that the state constitutions prohibt a change in state retirement laws which will reduce future cola increases even if the increases have not accrued. Thats like taxpayers claiming that a state could never increase income tax rates after the state legislature reduced the tax rates in a prior year.

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

You need to be more specific in your question. What is an OPEB trust? What benefits does it provide? Who are the employers?

Other Post Employment Benefits - like retiree health, long term care, etc.

The trust is used for holding the advance funding of the lifetime benefits.

For example, union-guaranteed life-time health coverage for fat-cat govt workers.

Isnt the tax exempt status of a trust that provides welfare benefits determined by designation as a tax exempt organizaton under IRC 501©((9) instead of a PLR or if the trust is established by government employer, exempt under IRC 115?

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

You need to be more specific in your question. What is an OPEB trust? What benefits does it provide? Who are the employers?

For whatever it is worth, I have handled and approved a small number of QDROs attaching the PS accounts of participants not in pay status for child support. All were issued by domestic relations section of the local courts (operating as the state collection and disbursement unit). The plans involved all provided for distributions under a QDRO before the earliest retirement age.

We are dealing with a plan that does not want to honor

FL-460 since they are claiming the participant/ex husband is not in pay status. Any case law or suggestions

There are two different types of child support orders which can be enforced against retirement benefits.

1. Under 42 USC 666(b) a state child support agency can issue an enforceable order against a retirement plan to require that back child support be paid to the state agency. The funds are a repayment to the state agency for amounts that the state agency paid to the custodial parent because of the failure of the employee to pay child support required under the divorce decree. The child support initially ordered by the divorce decree is not contingent on a retirement benefit being payable payable to the employee. Since this state agency order is authorized under federal law, the state order is not preempted by ERISA. However, the order is only enforceable against retirement benefits that are in pay status. Presumably the payments will be taxed to the participant. The failure of the plan to pay benefits to the child suport agency will result in liability of the employer to the child support agency of the amount of child support owed.

2. Under IRC 414(p) a state court can issue a DRO that a retirement plan pay funds from a participant's vested retirement benefits to a child who is an alternate payee. The DRO can be approved as a QDRO if the requirements of 414(p) are met. The funds can be paid to the custodial parent for the benefit of the child. The payments can be ordered even if the retirement benefits are not in pay status. Under the IRC payments to a child who is an alternate payee are taxed to the participant.

Q which type of payments are FL-460?

For form 5300, under Initial Qualification -- Date Plan Signed.

For the plan to be effective 1/1/2010, the Date Plan Signed must be on or before 12/31/2010.

Is this correct?

Thanks for all responses.

What kind of plan? While the above statement is generally true for a qualified plan of a calander year employer, there are exceptions. For example, elective contributions to a 401k plan can only be made after the date the plan is adopted.