HCE

Thanks Peter. That was my thinking too, but I really appreciate the extra information and especially the cites!

We received a QDRO (just a draft at this point) under which the court is ording the Plan to pay the fees of the Guardian Ad Litem of the Participant's minor child. I don't see any way this is possible, as QDROs are only supposed to award benefits to an Alternate Payee who is a spouse, former spouse, child, or other dependent. Has anyone ever seen this before? Is it legal?

The Plan is a DC Plan.

Sorry, "us" is the group delegated by the administrator to approve of (determine "qualification" status) of DROs. We have no received a DRO on this account so far -- they asked if we can approve of one received after the death of the AP. Since we have not received a DRO, I can't answer the last question. If we were to receive one, I would require it to address how to handle the death of the AP.

We have been asked if we can process a QDRO provided to us after the death of the AP. Our QDRO procedure does not address this scenario. Can we?

We have had a participant sending us letters for months, warning us that we might receive a QDRO but we should not honor it because it will be bogus (in this case it is a child support QDRO and he claims and has provided some documentation suggesting he is current on child support). Today we received the QDRO. It is certified by a court and, under normal circumstances, we would approve and process it. Questions: 1) should we tell the participant we received the QDRO and give him time to respond? 2) should we give the participant a copy of the QDRO (if not by default, should we if he asks for it)? 3) should we give him additional information, like the cover letter with the attorney's contact information (if not by default, should we if he asks for it)? My preference is to honor the QDRO if it has been approved by the court, but we have had at least one QDRO submitted in error in the past that was processed (i.e. the account divided and paid out to the AP) and it turned into a big mess. Our normal process is not to look outside the four corners of the QDRO document, but I want to avoid future headaches. EDIT: To add some context requested by some of the questions: "We" refers to the delegate of the Administrator tasked with approving QDROs. I refer to the Order as a QDRO, because we have already determined that it satisfies the criteria necessary to be approved as Qualified. Our process does call for notification of receipt of the Order, but not necessarily providing an actual copy of the Order, and definitely not for providing additional information, such as cover letters and attorney contact information. The big questions revolve around how much additional information we should provide to the participant upon request, and whether we should give any credence to non-QDRO related information (such as the participant's objection), and if we need to give the Participant time to respond before proceeding.

We are terminating and liquidating a non-account balance (defined benefit) NQDC Plan. This is not in connection with a company dissolution, bankruptcy, or change of control. I understand all the rules for terminating and liquidating a NQDC Plan (payment timing, aggregated plan termination, no similar plan for 3 years). My only question is that since this is a non-account balance plan, are there any rules or best practices for determining the liquidation amount for each participant? I don't see any official guidance, but how do we value benefits for purposes of making liquidation distributions? Thank you!

That was a fantastic, informative answer. Thanks a ton Brian!

We received a Medical Support Order in the form found on the HHS website: https://www.acf.hhs.gov/css/form/national-medical-support-notice-forms-instructions The form seems a bit lacking to me. The rules for QMSOs require the Order to include, among other things, (1) a reasonable description of the type of coverage to be provided, and (2) the period to which such order applies. This Order doesn't seem to do either -- they checked the box for "medical" coverage, but we have several options, and I don't see a place to put down the period of coverage anywhere. That said, it is a model document from the Federal government, so has it already been deemed sufficient? Since we have several medical options, do we just contact the participant and tell him he has to pick an option that provides for dependent coverage? If the participant signs up, and he is married, can he also sign up his spouse? I would think this counts as an open enrollment window for him and the dependent, but not for the spouse. If the participant is on his spouse's insurance, can he just add the dependent there rather than having to enter our plan (I assume this would require a different QMSO relating to the spouse's plan)?

Entity A has a Nonqualified Deferred Compensation ("NQDC") Plan. For one particularly highly paid employee ("Employee A"), Entity A is worried about having Employee A's NQDC liability on their books. Entity B has ties to Entity A, but is not in the same controlled group (you could call the entities affiliated). Can Entity A transfer Employee A's NQDC liability to Entity B, while also transferring the portion of the Rabbi Trust that holds assets needed to cover Employee A's NQDC interest to Entity B? One concern I have is that Entity A's creditors may not like the fact that Entity A is giving up assets (the Rabbi Trust holdings) at the same time they are getting rid of an unsecured general creditor. From a secured creditor's viewpoint, this isn't exactly positive. I welcome any thoughts, comments, answers. Thanks in advance!

This should generally not blow the short term deferral exception. You could look at it this way -- the participant lost his benefit under the plan when he retired early and the company voluntarily decided to give a payment anyway. It's not a substitution, since the participant isn't giving up anything -- his benefit was forfeited. Even if it was a substitution, trading one short term deferral payment for another doesn't blow the exception. However, like you said, there are some facts and circumstances considerations. If the company regularly accelerates, the IRS could view that as an indication there there is no real substantial risk of forfeiture. Likewise, acceleration cannot be under the control of the participant him/herself -- if the participant has any say over whether there is acceleration, that will almost certainly blow the short term deferral exception. Other than that, it should be an issue. You also want to make sure the acceleration doesn't happen too early. For example, if the company accelerates vesting 12/31/2021, the person retires in 2022, and the payment occurs after 3/15/2022, it will not longer be a short term deferral.

We had a participant who meant to defer his compensation until 2022, but he accidentally entered 2099. This was clearly a mistake, as he will be well over 150 years old in 2099. I know there is no real way to accelerate payments once the schedule is set (outside those listed in the regs, which we've already ruled out or otherwise explored), but are there any exceptions where the election was clearly, on its face, a mistake?

Luke - Thanks for the advice! You mention transfers in corporate transactions -- I would have less concern if we had transferred the obligation at the time of the transaction, but does your answer change since we are doing this a few years removed from the transaction?

Here is our situation: Company A sponsors a NQDC Plan. It later split into Company A and Company B. Several years ago, Company B was sold (no longer related to Company A), but the sale did not trigger payments under the NQDC Plan due to the "same desk" rule. However, now we have a problem where Company A is sponsoring a plan that still contains Company B employees. Company A has to rely on Company B for things like informing when one of the Company B participants has a separation from service. Company A would like to divide the plan and send the Company B portion to Company B. At that point, Company A doesn't care what happens to the Company B portion -- Company B can administer the plan itself, or it can terminate it. Obviously this should have been done at the time Company B was sold, but it wasn't. So, is there any problem with doing this? Since Company B is the true service recipient here, it seems legit. But I can also see the potential for abuse here -- giving a NQDC to a different company to terminate so other plans aren't aggregated with it and don't also have to be terminated. Has anyone run into this issue before or have any advice?

We recently moved from one trustee to another. The old trustee did not require us to get a separate EIN for the rabbi trust, the new trustee does require this. They say they need a separate EIN to file a 1041 for the Trust. Is this a concern? Could a separate EIN jeopardize the unfunded status of the nonqualified plan/rabbi trust? Is there any risk of not having a separate EIN? Can we (is it reasonable to) push back here?

Thank you! Any idea why we would have been previously advised that we had to have the vertical structure described above? That is the only thing causing me pause.

We have a parent who is owned by an ESOP. The parent owns Company A, and Company A owns Company B. We were told that we had to have this structure because of the ESOP. We would like to change the structure so that the parent owns Company A and Company B (making A and B sister companies). I don't see any problem with doing this, but I am concerned with messing up something in the ESOP based on the previous advice. Is there anything preventing us from making the change?

We have a Plan that provides benefits vest on 1/1/2022 (if the participant is employed) and are paid within 30 days thereafter (so, within the short-term deferral period). Clearly, the Plan doesn't provide for nonqualified deferred compensation, and 409A doesn't apply. We want to amend the Plan to provide those same benefits vest on 1/1/2023 (if the participant is employed) and are paid within 30 days thereafter (so, still within the short-term deferral period). Can we do this? It seems that we are just switching from one 409A-exempt arrangement to another, so I can see the argument this doesn't ever implicate 409A. But I also see the opportunity for abuse here, and I believe I've seen commentary on this before (I just can't find it now). Bonus Question: Would it be any different if we were accelerating the vesting/payment rather than deferring it further (but still keeping it within the short-term deferral window)?

Plan doc allows acceleration with Board approval. The agreement just has standard terms, but says options expire on termination of employment. I would like to treat this as amended before termination, and ratified by the Board thereafter. However, Board approval (or ratification, if you prefer) will not be final until after termination (which has already occurred), so it may be too late.

We have an issue. Stock options were granted and, under the terms of the options, they were scheduled to vest next month or expire if the participant is terminated before vesting. Several employees terminated last month, under the understanding that vesting would accelerate to vest on their termination dates (giving the participants up to 3 months to exercise post-termination), subject to board approval. We have not yet received board approval, but it is soon forthcoming. So, now, we have a issue that the options technically expired before they were officially accelerated, even though acceleration was anticipated (subject to board approval) prior to them expiring. Would it be at all advisable for the board to approve the acceleration now? Or have we already blown it with respect to ISO status and 409A compliance (assume the stock price has gone up since grant, so they would not have an exercise price of FMV if treated as a new grant today). Alternatively, can we treat them as accelerated prior to termination (and, consequently, expiration of the options), and the acceleration was simply ratified by the Board at a later date? Thank you!

In this case it's only sort of ERISA -- it's a top-hat, nonqual plan. But we are anticipating a similar issue with the ERISA plan in the future, so if you have any thoughts on that, it would be helpful as well. We're also more than willing to apply any ERISA rules to the top-hat plan as a best practice.

We need to calculate survivor benefits for a spouse, but we only have male/female, female/male mortality tables. Do male/male and female/female tables exist that we can use? Or is it okay to use the opposite-sex tables even for same-sex couples? If we do the later, are there any special considerations (i.e. do we need to notify the parties or obtain consent)?

We have an Early Retirement Window for our pension plan going into effect. We crafted the eligibility requirements and are comfortable that they are fine. However, today, we discovered that four people at a key position at the company might want to participate. There are only 4 people in this position company-wide, and having them all leave at the same time would be devastating. Can we state in the eligibility section that, for this specific position, only two can participate, and the people with the longest service at the company have first dibs? Thank you.

We have a payment that is supposed to be paid 10 days after vesting, so it is subject to the short term deferral exception. We want to accelerate the vesting, which would mean we are accelerating the payment as well, but it will still be subject to the short term deferral exception. I believe I recall some guidance saying this still violates the anti-acceleration rules even though at no time was it technically deferred compensation (since it was under the exception in both cases), but it's not in the regulations. Does anyone know if I'm correct that this guidance is out there, and does anyone know where this guidance can be found?

Thank you again for the response. Do you know if an employee participating in an ERW can begin benefits immediately without penalty if he/she is under age 55?