FOOTE Notes on Retirement
	
Topic:	End of the Year contributions to Profit Sharing Retirement Plans
	
Scenario 

	Participant “Jack” and spouse “Jill” get divorced and sign a community property agreement.  In the agreement, Jill was awarded her community property portion of Jack's 401k/Profit Sharing Account as of September 30, 2011 plus gains and losses until the QDRO is executed. In January of 2012, Jack's company contributes $16,000 in profit sharing to his 401k.  Note that nearly every profit sharing plan makes the contribution to the participant's account in January based on the previous year's performance.

Questions

1-	Is the $16,000 considered a "gain or loss" such that the Plan will include it in their qdro calculations?

2-	Is the $16,000 or a portion of it community property? 

3-	If community property, was the profit sharing contribution partitioned in the property agreement?

Proposed Answers

	Jill's attorney will argue that the profit sharing contribution was a specific right of the employee that was accruing throughout the year, similar to a bonus.  Jack's attorney will contend that it was a discretionary corporate award that was never guaranteed; thus making it "awarded after the termination date."

	There seems to be no specific jurisprudence ruling on this specific fact pattern.  It is suggested that, to rule correctly, a court should look at the company's pension summary plan description (spd).  Many plans will specific the rights of the employee and explain their method of awarding bonuses and/or profit sharing contributions.  As a preventive measure, Jill's attorney should have briefly reviewed that section of the spd, and if applicable, included a provision in the property settlement that awarded Jill a portion of certain future profit sharing contributions.  

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	With over 125 local and national retirement plans already reviewed and outlined, Kuehne & Foote, APLC is here to consult on any retirement issues that may come up before, during or after any property settlement or retirement division.