What is with these recordkeepers and QDRO's

[austin3515]

This comes up all the time. We get a court signed document saying to move money from the Participant to the AP and they come back and say "we won't comply with the order without getting the paperwork back from the participant."

To which I say "are you crazy??" We learned the hard way with a large QDRO where we waited until the participant returned paperwork (per the general procedures of the recordkeeper), which of course she never did. Imagine the hot water we were in when we told her account was down 17%... (this was back in 2007 or 2008).

Am I the only who constantly bickering with recordkeepers to get them to move the money to a new account ASAP.

[My 2 cents]

If there is a proper, qualifed DRO, that does not condition payment to the alternate payee on benefit receipt by the participant, how could the participant possibly have any say with respect to following the terms of the QDRO? What "paperwork" is there to come back from the participant? The money specified in the QDRO is literally no longer the participant's. In your 2007 or 2008 situation, what would have happened if you had handled it like this:

a. The QDRO says to transfer, at the alternate payee's request, 50% of the account balance at that time.

b. The account balance, as of the date the alternate payee requested payment, was $50,000.

c. For whatever reasons, the payment to the alternate payee was delayed pending some sort of paperwork from the participant.

d. At some point, either the paperwork from the participant was received or the decision was made that payment could no longer be delayed. At that time, the account was worth $40,000.

e. Based on the amount due originally, the alternate payee is paid the $25,000 that would have been paid had there been no delay, leaving the participant with $15,000. Seems fair to me!

[ETA Consulting LLC]

Well, to Austin's point, I cannot fathom a situation where anything would be needed (or required) from the participant in order to act on a Domestic Relations Order that has been Qualified by the Plan Administrator. That would be to presume the participant has control that he does not have. The quickest way to show that is to reference the plan's written QDRO procedures; which will likely say nothing about a required action from the participant.

Good Luck!

[austin3515]

_{I'm with you guys, believe me. But the recordkeepers want their forms!}

_{Has anyone noticed that reply font is very very small??}

[ETA Consulting LLC]

Yep. Very Very Very small. I needed a magnifying glass to see it.

[rcline46]

For those record keepers. Tell them the AP will file an ERISA 501(?) suit against them for interference in their ERISA rights unless they (the record keeper)can show where 'their forms' are required by ERISA.

I am sure you know an ERISA attorney who would do that pro-bono just for fun!

[austin3515]

I can usually beat them into submission, but it's just frustrating to have to do so every single time.

[ETA Consulting LLC]

I think it's Section 502 of ERISA that gives the participant a right to bring civil action. I think it steps further into a fiduciary role for a recordkeeper to take it upon themselves to not to follow the plan administrator's instruction given consistent with the plan terms to split the account. I wouldn't want to be in that position.

Good Luck!

[My 2 cents]

I think it's Section 502 of ERISA that gives the participant a right to bring civil action. I think it steps further into a fiduciary role for a recordkeeper to take it upon themselves to not to follow the plan administrator's instruction given consistent with the plan terms to split the account. I wouldn't want to be in that position.

Good Luck!

Yes, great idea! Get around their reticence by pointing out to them that their dragging their feet makes them fiduciaries (and poor ones at that)! That ought to get them moving!

[ESOP Guy]

_{I'm with you guys, believe me. But the recordkeepers want their forms!}

_{Has anyone noticed that reply font is very very small??}

I think austin wrote something but it was too small to read!

[david rigby]

There have been a couple of discussion threads (in the QDRO message board) about fraudulent orders, usually sent by the AP or the AP's legal counsel directly to someone who is not the employer.

Don't assume they are idiots or jerks. It's possible that some vendors are being very cautious.

[austin3515]

Well, except that the trustee of the plan is signing off on it.

[Gadgetfreak]

Find a recordkeeper who values their relationship with the TPAs. I find the bigger the RK, the more difficult it is to deal with them. Smaller independent RKs often state very clearly what their role is. Even if they also sometimes serve as TPAs, when on their unbundled service platform, they will often say that they will comply with whatever the TPA requests. After all, that is really the job of a RK.

For those RKs that are knowledgeable (maybe they also have a TPA business), having a second set of eyes can be helpful as they may (quietly) let you know if they think you made an error. But, at the end of the day, it is the TPAs responsibility to give direction to the RK and the RKs job to comply.

[SearchLight]

Speaking from a recordkeeper perspective, I ask for two things before dividing accounts - a copy of the final court-approved DRO and the Plan Administrator's written approval of it as qualified. I typically work with PAs to help them in their approval/review process and let them know if I see anything that might hold up the division process, and sometimes those situations do require participant input to resolve. Those are only about 10-15% of the DROs I see, though, and the issue is almost always resolved before a PA approves rather than after.

From there, I don't require the participant to sign anything to authorize the creation/funding of the alternate payee's account. Their consent to a court order saying "give my ex such-and-such amount" carries way more weight with me than any form I could ask them to sign, and I'd rather not muddy the waters by creating an extra layer of sign-off that a disgruntled ex could use to drag me into a fight I want no part of.