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Plan Administrator's discretion in approving a DRO


Guest Chelsi

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Guest Chelsi

3 years ago, I had a DRO for a municipal gov't deferred compensation plan approved by the plan administrator. For whatever reason, my ex refused to agree to it. Now he is agreeable, but the plan administrator told me there may not be enough to cover my share after the gains/losses are figured in because my ex's child support obligation was paid from it. She even went so far as to blame me that the child support was coming from his deferred comp account and that I shouldn't have waited this long!. When I asked her if she knew this for sure if there would be a deficiency, she said she didn't know and that the record keeper would not continue to figure gains/losses if there were no funds left in the account, so we may not know the total of my marital share of his account. It was all speculation on her part. She wants me to add a provision to the DRO that if there isn't enough to cover the lump sum plus gains/losses, that my share would be 100% of the fund. That means that she is trying to get me to take less than what is stated in my stip. just because my ex's child support obligation had reduced the amount in his fund. Also, my stip would have to be amended to include this provision. Anyone have any ideas what I should I do?

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3 years ago, I had a DRO for a municipal gov't deferred compensation plan approved by the plan administrator.

That makes it a QDRO, assuming the DRO was signed by the judge, and you should have gotten what the QDRO specified.

On the other hand, if what the plan administrator approved was a draft DRO (not signed by judge), then it's more complicated and your attorney may have to sort it out.

The divorce decree defines what you get. The QDRO is an extra document relating to what you get from a pension plan. Generally, the QDRO reflects what the divorce decree specifies, but in a format and with the specifics that the pension plan needs to be allowed to release benefits to you from the plan.

Sounds like your ex tried to pull a fast one (use up the account and then agree to the DRO), but I don't have all the facts and I am not a lawyer.

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First, because this is a government plan, it may be subject to state or local law that affects the matters. Assuming that the plan follows federal standards under section 414(p) ot the tax code, it sounds like the order was not qualifed when "approved", as suggested by GMK. The approval was probably only with respect to form, which is a common procedure preceding submission of the proposed order to the court for its consideration and approval. An order cannot be qualified before it is issued by the appropriate authority, usually a court. The "my ex refused to agree to it" statement is the clue.

One of the standards for qualification is that the plan cannot be ordered to pay more that the value of the benefit. The administrator's suggestion for terms of the order to be submitted now is constructive: pay the lesser of the value of the benefit at the time the order becomes qualified or the entire value of the benefit. The order will not qualifiy if it demands more.

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  • 3 weeks later...
Guest Chelsi

The plan administrator previously added the following to the DRO to cover any shortfall:

" In the event that the Participant makes any type of withdrawal that would cause the account balance

to fall below the amount awarded to the Alternate Payee, the Participant shall be responsible for

reimbursing the Alternate Payee for any shortfall, directly to the Alternate Payee, from the

Participant’s own separate assets. In no event shall the Plan be responsible for reimbursing the

Alternate Payee for any shortfall including, but not limited to, any shortfall arising out of market fluctuations."

My issue with the administrator is that the plan is already protected in the event of a shortfall and doesn't need to change the wording of the distribution because it won't reflect the agreement between me and my ex spouse.

None of the other plans that we submitted qdro's to asked us to change the wording of our agreement. There is always a chance that the funds drop in value due to market conditions and that is something all plans deal with. Also, my ex spouse has assured that administrator that there is sufficient funds to cover the distribution in the DRO and she argued with him even when he pointed out that the DRO has the above paragraph to protect the plan in the event of a shortfall. The judge is ready to sign the DRO next week. We are going to go above her head because we are not changing the distribution we agreed to just because she says so. We know that the plan can implement the distribution as stated in the DRO.

Shouldn't that be all they are concerned with and not meddle in our agreement?

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  • 2 weeks later...

The general idea behind a QDRO or state law DRO/QDRO or even garnishment in general is the third party should not be required to pay more than what it has on account for the participant/garnishee. That would be like trying to get a bank to pay you more than what is in your husband's bank account. If your husband doesn't have money in the plan, then there is nothing for the plan to pay. The plan can't steal the money from someone else's account.

Just make sure that you get 100% of what is in the plan for your ex-husband and 100% of what will be in there for your husband until you are paid in full. Other than that, you have to get the money from the ex-husband some way else.

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