Larry Starr

I really would want to see the limiting language in the plan document that you are talking about; all too often what we are told the plan says is not really what it says, so I am cautious about commenting without seeing the language. I can say I have never seen DB language that has specific forms of payment that are only applicable to an alternate payee (except for the statutory modification noted below). Is it legal? Well, I suppose if it's non-discriminatory under the benefits, rights and features provision, then it would be ok. I would certainly never consider putting it in my plans; why bother? What's the reason? Here is the typical language included in my separate interest QDROs and a comment about that: “Actuarial Equivalent” means any form of benefit available under the plan (such as a Single Life Annuity for the life of the Alternate Payee) that differs in duration or manner of payment from another form of benefit available under the plan (such as an annuity with a different starting date for the life of the Participant or a Qualified Joint and Survivor Annuity), but which is actuarially equivalent to the other form of benefit when calculated using the actuarial assumptions and factors used by the plan itself. COMMENT: There is one form of benefit an Alternate Payee cannot be awarded in a QDRO, and that is “a Joint and Survivor Annuity with respect to the Alternate Payee and his or her subsequent spouse,” 29 U.S.C. Section 1056(d)(3)(E)(i)(III). Any other form of annuity offered by the plan to Participants may be chosen by an Alternate Payee.

You have the correct answer; it is NO. This has to be the case or the rules applicable to SIMPLEs would be meaningless and could be avoided by judicious arrangement of business entities. Again, answer: NO. Larry.

Absolutely ok to use prior comp; make sure you list the sole prop as a predecessor entity in the plan document for service and eligibility. Larry.

Recognize that the 10% withholding is not a "mandatory withholding" like the 20% that regularly applies to normal distributions that are eligible to be rolled over but aren't. The 10% is a voluntary withholding in that it can be waived. We always provide the W-4P and ask clients to have the participant sign if if they don't want withholding and many do not want withholding. There is a caveat they get reminding them it is still going to be reported and subject to taxation and they might be underwithheld and subject to a penalty so they might want to consult with their tax advisor. After that, they are on their own. Having said that, in 40 years or so, I have NEVER seen any enforcement on the need for a W-4P to avoid the voluntary withholding. As long as it is reported on the 1099R. the IRS will collect its taxes (and possibly penalties for underwithholding).

Back to the original question.... Yes, drafting a QDRO is practicing domestic law; no question about it. I can actually practice "pension law" (the Internal Revenue Code stuff) because I am an Enrolled Agent (CPA has same authority) but a QDRO is outside of that area. I draft lots of QDRO's. I do not ever work for the participant. The participant is told to have their lawyer contact me. I have a simple one page form that is filled out and signed by the lawyer that makes it clear that the lawyer is hiring me and I provide my finished "draft" product to the lawyer for them to take to the court. It even has the lawyer's name on it as "prepared by", not mine. I don't care who sends the check (I get paid before doing the QDRO). Often I get two checks; 1/2 from each of the soon to be ex spouses, but it is still the attorney that is hiring me and my document is the work product of the lawyer. Therefore, I am NOT practicing law.

I'm pretty sure I wrote that ASPPA proposed answer to the question and we know that the IRS agreed. The participant had a hardship distribution when the distribution was made and at the time of being made, it met all the criteria. The fact that the deal fell through doesn't change the circumstances of the distribution or the tax ramifications. The rules are written to allow these distributions and a valid purchase/sale agreement is all that is necessary to justify it. If the deal ultimately doesn't happen, well that is just life and there is no going back.

No, perpetual loan contemplated having a $50,000 loan, paying it all off and borrowing it all back the same day (or next day). That is considered a perpetual loan.

Classify them as a lawsuit waiting to happen from the union. You just can't do this.

The original statement contemplated providing ADDITIONAL benefits to some union employees beyond what the CBA calls for. That is "unfair labor practice" and is prohibited.

It's not pension law that is the problem (once you understand that they are not "union" employees under ERISA), but labor law that is your concern. Unilateral action on ANY BENEFITS by the employer is prohibited if the employees are represented by a UNION.

Trust me; BIG PROBLEM!

MIke, we mostly agree, except.... They are not covered by the CBA as owners; therefore, they do not get the free pass as "union employees". Usually, there is NO "union compensation" because they don't have to pay themselves according to the union rules. But they might, in order to get certain benefits under the union contract if they are allowed to be members of the union even though they are not covered by the CBA.

They can be card carrying members of the union; that doesn't make their employment subject to the terms of the CBA (it doesn't). See my longer response.

See my longer response, but right here you say that retirement benefits are a mandatory subject that must be considered in the CB process. What part of that leads you to believe you can set up a plan for the union employees WITHOUT collective bargaining about it? You can't.

It's a BIG issue. See my longer response.

So many things wrong here. 1) The owners are NOT "union employees" because their employment is NOT subject to the terms of a collective bargaining agreement. They might be paying dues, but they are not union members as we talk about them for retirement plan purposes. For example, the union does not determine their wages or hours. Therefore, if THEY are covered under a plan you set up, you have to look at all the coverage and discrimination rules. 2) You cannot set up a plan for the "true" union employees because their employment IS subject to a CBA and the employer (your so called "union employee" owners) MUST negotiate all benefits with the union. The union might want more take home pay instead of an additional retirement plan. The employer does not have the unilateral right to change benefits, even for the better. It must be negotiated with the union. The combination of those two issues should be enough for you to understand why you can't do this at all. You are not covering SOLELY collectively bargained employees because the owners are NOT that. And, you are prohibited from unilaterally setting up a retirement plan for even ONE collectively bargained employee without bargaining with the union about it. So, any questions? Larry

Send your real email address to me at larrystarr@qpc-inc.com and I'll send you my ASPPA outline that covered all these issues.

Absolutely NOT required. The partners can use any allocation method that they have agreed to, and it is not even required that such agreement be in writing. I believe my original outlines on SE Comp calculations included a discussion of that issue (but I'm home now and the outlines are at the office so I can't confirm).

I'm not sure that is true. There is no one yet in the category of "terminated with over 500 hours", and there is no one who has met the requirement of being employed at the end of the year YET. Therefore, there is no one who is entitled to an allocation at this point. You are adding another category; those who MIGHT terminate, but that is not a category that exists in this plan definitions of who is entitled to a contribution TODAY. See my other response above.

I might be missing something; it seems that there is a requirement to be employed at the end of the year, or if not, have over 500 hours before being terminated. No one currently has been terminated with over 500 hours so no one falls into that category for an allocation. That leaves only those employed at the end of the year with 0 hours. HOWEVER, it SOUNDS like there IS a requirement that in order for everyone else to get that allocation who is still employed, they have to be employed at the end of the year. That means you have an end of the year employment rule for everyone who is still working, and why can't you then amend the plan to now have individual classes? There are only two classes of participants for allocation prior to the amendment; those who terminated with over 500 hours (there aren't any) and those who are employed at the end of the year (the end of the year hasn't happened so there aren't any of those YET are therefore no on is YET entitled to a contribution). It might be considered a tortured explanation, but I think it works. Mike: what do you think?

Huh? The outstanding balance the day before the new loan was $49k. That's the highest outstanding balance in the prior 12 months. That leaves a maximum of $1,000 that can be borrowed. I'm not even going to try to figure out your math because it makes my head hurt! :-) The purpose of the rule is to PREVENT a perpetual loan, which is what you are attempting; that's a Bozo No No! Larry.

I would just add to MIke's post (which is absolutely correct, OF COURSE!) that no one I know has ever seen any enforcement on this issue. While we provide the funding notice and tell the client to distribute, we actually never know if that was done, nor do we ask. There is a copy in the file and it is our file that is used for any audit. I, as an Enrolled Agent can take a full power of attorney on any IRS audit (DOL seems to accept them as well for that rare DOL audit, and the DOL apparently does not care about funding notices at all) so I am in control of the audit and the client is almost never even seen (occasionally an IRS agent will visit the client, but they are prohibited from talking to the client because of my POA) . So, when our file is reviewed, in our office where the audit is held, there are the funding notices right in the file and that is never an issue. FWIW.

He can not make things worse by just including the predecessor entity for everyone.

I'd say plan is not well written and you should find new documents. Here is what is in our documents: (B) Qualified Preretirement Survivor Annuity (QPSA). If a married Participant dies prior to his/her Annuity Starting Date, the Plan Administrator will direct the Vendor to distribute a portion of the Participant's Vested Account Balance to the Participant's surviving spouse in the form of a QPSA, unless the Participant has a valid waiver election in effect or unless the Participant and his/her spouse were not married throughout the one year period ending on the date of the Participant's death. Makes it clear that the mother ain't the bene!

YOU asked if "anyone has considered it". So, I considered it. Any considered opinion is that it is NOT a claim. While I am not a CPA and can't do audits, I am theoretically an accountant (I'm an "enrolled agent") and I simply would not treat this as a "claim" until such time as a court (or agency) of competent jurisdiction made a decision that impacted the plan in some specific way.