Larry Starr

I don't think competence issues have anything to do with the issue in a retirement plan (unlike the medical issues that arise). The issue has been laid out in the earlier emails. There are differences of opinion, which is what makes horse racing!

There's no such thing as a state specific QDRO. There are certain formatting items for the court, but you can usually copy the same information format from the judgement of divorce if you have not previously handled one for a particular jurisdiction. Also, I've had a few judges who require signature lines at the end of the order for the participant and alternate payee to sign. While this is absolutely not necessary, what the judge wants the judge gets. I should point out that it is the judge's order; the parties (one or the other) don't have to agree with the judge's decision and nothing forces him (or her) to agree to the order itself by signing it. It is an order from the judge to the plan. I haven't yet had one where the two parties did not sign, but I am awaiting the day when one pissed off spouse says "I ain't gonna sign that f'in order" and then see what the judge does.

And let me try this again.... There are differences between 14 year and older "employees" (but under 18) who have working papers (which are only available at age 14) and child actors/actresses employed under what are mostly called "Coogan" laws (after child actor star Jackie Coogan who got fleeced by his parents). I believe we are talking about the former, not the latter. And it DOES make a difference. Here's something to read about the Coogan laws: https://www.sagaftra.org/membership-benefits/young-performers/coogan-law You can google for much more. I happen to be significantly involved in Broadway productions; when you have real children involved, the complexity is enormous. Of course, this almost never applies to children hired by their own parents participating in a retirement plan with employee deferrals when the child is under 18! How many angels can dance on the head of a pin?

Agreed.

I didn't read all this, but you can read my article written quite a few years ago in the Journal of Pension Benefits, which I've attached. "Borrowing From Peter To Pay Paul". BorrowingFromPeter.pdf

I understand all that, but we all make mistakes (I thought I made one once, but I was mistaken!). As originally outlined, I am quite certain of my response being correct. Now, we have this "minor" additional point that you added which was left out of the original: "What actually happened was the plan in question was amended to exclude the participant from any employer contribution for 2015." Well, as Emily Litella would say: "Oh, that's different; never mind!" The participant wasn't "waiving" anything from the plan as (assuming the amendment was legitimate), she wasn't entitled to anything from the plan! Gee, sure does make it different when we have the full facts, doesn't it? ? Larry.

Like I said, at this point I will agree to disagree. ERISA has everything to do with it; if a federal court agreed with me under ERISA terms, then ERISA controls. That is the question.

Also a reasonable possibility, but the deferral ability as of 10/1 is critical otherwise you don't have a SH plan for that year.

Again, we'll agree to disagree (or at least, I will). You ignore the fact that we are dealing with an employee allowed to be employed by the issuance of child working papers, which had to be approved by guardian, school and who knows who else in a given state. The permission for that child to be an employee has already been given; it is not restricted with regard to the application of benefits from that employer AGAIN by the guardian. I would want to see a federal court of competent jurisdiction opine that a bona fide employee loses his ERISA rights when he is a minor. Frankly, a probate court decision is not enough because this is not to be determined under state law, but rather whether ERISA controls, and that is made only at the fed level. FWIW.

Agreed, but you should all recognize that the money does not have to go back to EJ. It could be transferred back to an IRA at, say, his local bank that he just sets up.

No disagreement. I made my conclusion NOT on fringe benefit exclusion, but on the first clause in the definition: excluding (even if includible in gross income) reimbursements or other expense allowances.

What made you think this was legal? It isn't. I'd say this plan has a problem that you caused and now should be fixed, but probably won't.

Of course that can't be done. Employees don't have the option of "waiving" their contributions, otherwise employers would be "encouraging" such an action all the time. Frankly, who cares what the employer is "thinking". They don't know the law; that's why they pay us. The employer has to be told that this is just not legal. No more than trying to force an employee to pay back a loan made to the participant by the employer (not the plan) from the retirement plan distribution to that employee.

RTFD and tell us what language you have in the plan that deals with this issue (if any). Then, if you find that language, you follow it if the client doesn't want to amend to make it "good".

Does the plan get the interest on the loan? YES IT DOES. That's the law. Now, how that return on investment gets allocated is another issue, and in many plans it is allocated back to the participant who borrowed the money. In many of my plans (with no participant direction) it is not. It is simply another investment of the plan (it's a lot like a bond). Our QP world is full of technical issues that are confusing to the lay individual (and rightfully so). That's a good thing because that's why employers need people like us! (that's sarcasm). Did you know that employee 401(k) deferrals are also NOT employee contributions? Legally, they are EMPLOYER contributions. And while that makes no sense at all to the lay person, it actually makes perfect sense when you understand our convoluted tax laws.

OK; given that information, I would agree that it would count as "fringe benefits" and would not be included. So now, you just have to deal with the correction, and I will let others opine on that process. You asked this in the original posting: Do I just document as an operational failure, implement new procedures, lecture the client and move on? I would do as you suggest, and also have the participant elect a fixed dollar amount deferral that approximates what he wants as the deferral percentage that would include the fringe benefit in the calculation.

I think you are looking at the wrong issue. The plan is adopted on 9/30. When it is adopted, the employees have the right to defer at that time. Your problem is one of getting the accounts established (one has to question why so long, but that is another issue). The employees can start deferring with the first payroll after 9/30. There is no reason why a deferral election form could not be produced immediately and money withheld that will be matched later. The only problem is a place to put the money. Why not open an account in the name of the plan in the bank (it can be a money market account) that will hold the funds until the more formal investments are chosen and made available? Then, those warehoused funds would be moved into the appropriate investment. I think you are playing with fire if the employees only really have 30 days to make deferrals, and that is not going to justify the safe harbor aspect of the plan, IMHO.

Sorry, but I am not willing on the above information to come to a conclusion on this issue. There is no such thing defined that I can find called "living expense allowance", taxable or not. Now you say it's somehow related to "travel expenses". Travel expenses is a deductible expense to the business and not taxable to the employee if they are reimbursements for allowable expenses (taxi, airplane, hotel, gas, etc. etc.). What the heck is this EXACTLY? Are they subjecting this extra money to withholding? Are they paying SS taxes on it? It may not be a fringe benefit. What exactly is the language in the plan that excluded fringe benefits? Does it define the fringe benefits that are excluded (or does it provide a list of which ones they are)? How are these amounts being reflected on the W-2? Is it lumped in with the regular wages or is it something else? I would want more information on this animal. Exactly what it is? How is it determined for each paycheck? Does he have to submit expense account statements or something? I think it is premature to automatically assume that they are right about it being a "fringe benefit" that is excluded. Maybe it is, but we don't have enough information to make sure of that at this point.

Hmmmm.. first, what kind of job does he has that produces a living expense allowance? Second, would the actual dollar amount contributed have been allowed on his allowable compensation if he had made a fixed dollar or higher percentage allowance (in other words, could the amount actually contributed be justified on the lower comp)?

I'm a bit confused over what language you are saying is discretionary. Can you be specific? Yes, I am involved with QDRO processing for our clients; more than that, I actually draft most QDROs for participant's lawyers in our plans (maybe 85 - 95% of them). Note: we are ALWAYS hired by an attorney to draft the order on their behalf which is sent to them to take to the judge for execution. To work directly with the employee would, in our opinion, be the practice of law on a state level and my Enrolled Agent status would not provide any protection for a charge of unauthorized practice of law since the drafting of QDROs is clearly a state law issue.

Email me at larrystarr@qpc-inc.com and I'll send you a copy of the whole order. Attribution: it's from Relius (FIS), or SunGard or Corbel, or Pentabs or whatever you would like to call them.

If you don't know that technical term, see this link: https://www.snopes.com/fact-check/cram-it-clown/

I think this will give you your answer that you are looking for (from the current edition of Derrin's book). Hours worked for the staffing company are required to be counted when someone becomes an actual hire. Q 5:44 How do the leased employee rules affect a “lease to own” situation? Many employers will lease an employee for several months, or possibly longer, before offering them a permanent position with the company as an employee. This can simplify bookkeeping and reduce an employer’s unemployment insurance costs. If a recipient hires its former worksite employee, the employee is credited with all hours of service earned while working under the leasing arrangement, whether or not he or she satisfied the substantially full-time requirement. [Code §414(n)(4); BL 11, BL 135, BL 136] Example 5.44.1 Sandy’s Sweatshop leases Ellen from a temporary agency for three months, during which Ellen works 500 hours for Sandy. Sandy then hires Ellen directly. Ellen is already credited with 500 hours of service, even though Ellen was not technically a leased employee because she did not satisfy the substantially full-time requirement. Because the employment commencement date [Q 19:8] is the first day a worker is entitled to be credited with an hour of service, [DOL Reg. §2530.202-2(a)] Ellen’s first eligibility computation period begins when she started working for Sandy under the leasing arrangement. Remember that the longer a “temporary” worker stays with a company, the more likely it is that a court may find the company is the true common law employer. [See Q 3:28] The importance of this issue can transcend the importance of the leased employee issues. Example 5.44.2 Fancy Tools, Inc. has a good health plan for its employees. The plan document says all employees working over 30 hours per week participate. Fancy Tools needs a new shipping clerk. They contact Astaire Temps, who sends over Waldo as a temporary clerk. Waldo works there several months. Waldo is just like other Fancy Tools employees, except that Astaire gives him his paycheck. After four months there, Waldo contracts cancer and demands to have his medical costs covered under the plan, because he is Fancy Tools’ common-law employee. While that claim might have been rejected out of hand had he worked there only one week, it becomes more credible the longer he is there.

Wonderful; can you share the research? Do you have a ruling from the State Department of Labor? What info brought you to that determination? BTW, we have NO plans under age 18 (I'm not sure we have any under 21 at this point), so this is not an issue we have to deal with in our plans.

I should just point out that if you are REQUIRING a legal guardian and one is not legally required, you are interfering with participant rights and that is a major Bozo No No! Sure, get an attorney to research the issue for your state, but if he says no guardian required, you should drop that requirement. FWIW.