QDROphile

I now infer that “my” modifies only “legal fees” and not “expert witness fees” I started from a mathematical perspective: a(b+c)=ab+ac

One can appear as a lawyer for a party and be an expert witness in the same proceeding? I am reminded of how certain New York law firm associates bill more than 24 hours in a day, and not by employing the trick of traveling west across time zones to expand the actual number of hours in a “day”, but that sort of double billing is not the same thing. With respect to “actual notice” and “pendancy” of a domestic relations order that might grow up to be a QDRO, I thought that Peter Gulia asked, not too long ago, for any examples of judicial decisions relating to actions taken by plans, or failures to act, based only on notice that a DRO was forthcoming, with no DRO yet submitted to the plan (a DRO is what the statutory language requires to activate the plan)). I recall that a plan can get in trouble for acting, or refusing to act in accordance with usual plan procedures, based on notice (which is a juicy topic in itself) that a DRO was expected (someday?). I recall that no example was given of a plan simply continuing to act, or not act, in accordance with usual plan terms procedures in absence of a DRO based on some other notice that a DRO was expected. You have shared a wealth of citations for various propositions in your posts. Do you have a citation in support of the proposition that a plan that does not provide otherwise in its written QDRO procedures will continue to administer in accordance with its usual terms and procedures unless and until receipt of a domestic relations order? I am aware that the Department of Labor asserts in its QDRO book, among other erroneous interpretations, that some unspecified notice of expectation of a DRO imposes some duty on the plan not to take action contrary to the unspecified interest of a supposed would-be alternate payee, presumably, even when that would compromise the express rights of a participant under the term terms of the plan? If no example can be found, it may be because no administrator/fiduciary would be so bold as to simply proceed without communication to the relevant known persons and establishment of reasonable conditions and times for conforming to applicable standards. That leaves us without measure of where the lines of breach of fiduciary duty are drawn. Fortuna Favet Fortibus.

What do you mean by “determine”? The PA might be able to give a very accurate estimate. The plan can’t determine anything except on the basis of a DRO. Is the settlement agreement the DRO? The plan can advise if the order appears to satisfy the formal requirements for qualification.

“… seem to fail the requirements of Code section 414(p) and ERISA section 206(d)(3) -- at least as to New Plan -- that the DRO must clearly specify "each plan to which such order applies" because the DRO is only directed at Old Plan. The DRO makes no express mention of applying to any successor plans. Thoughts?” I would not plant my flag there. The requirement for properly identifying the plan is for the benefit of the plan administrator and the avoidance of ambiguity. Your presentation of the facts tells me that there is no ambiguity and the plan administrator, or other QDRO fiduciary, knows perfectly well that the order applies to an account under the plan. I see no failure to identify the plan, in fact. The information to identify the plan from the plan identified in the order is within the knowledge of the plan administrator. I would not want to be in front of a federal judge (after the ex spouse exhausts the claims procedure) making that argument for my decision that the order is not qualified and should not be given effect. The better argument is that the delay in submitting the order to the plan makes it impossible for the plan to give effect to the terms of the order as a practical matter and also potentially encroaches on the interest of a plan beneficiary, the subsequent spouse, to whom the plan owes a fiduciary duty.

Just for the fun of it, disregard all of the plan history, adequately recounted or not, except the “fact” that no domestic relations order was ever submitted with respect to the participant until now. The plan receives a domestic relations order that it cannot reasonably implement, largely due to the passage of 30 years. I have been out of law school for more than 30 years, but I think the concept of laches is still valid. There are several ways to go from there, possibly one that would give the ex-spouse a shot at some benefit (almost certain to fail at its inception in state court). Interpleader is not one of the ways to go. The plan has an obligation to process the domestic relations order in accordance with the law and applicable procedures, including its QDRO procedures and claims procedures. In the plan’s disposition of the domestic relations order it might want advice of legal counsel. It surely will not be guided by the superficial consideration of strangers.

Unfortunately, a threat of some personal liability is what is sometimes required for a breakthrough. It often starts with a service provider that is not an ERISA “plan administrator” being reminded/threatened that it becomes an ERISA fiduciary if it steps into activity that is the province of the ERISA plan administrator, such as any discretionary action, which includes interpretation of plan terms (which also includes plan policies). TPAs will readily toss the hot potato to the fiduciary. Beware that the fiduciary (who may have just discovered its role) will be looking for help and the TPA may be willing to advise under the table, so it may take continued pressure to get the fiduciary to really step up to proper performance (e.g. getting advice of legal counsel in any hot or complicated matter).

I am not a big fan of jumping to interpleader. The plan fiduciary has an obligation to interpret plan terms and ancillary plan documentation such as beneficiary designations. Any payment of plan benefits should be a result of a claim for benefits. If the plan fiduciary is uncertain about the identity of the beneficiary, but has identified potential beneficiaries, the plan fiduciary should invite every reasonable suspect to submit a claim for benefits. The plan fiduciary should then determine the claims, issue the determinations, and then allow claimants to follow the plan‘s claims procedures with any appeals that they believe are appropriate. The fiduciary will benefit from the arguments under the claims and the appeals. The fiduciary will then decide the appeals. The plan’s claims procedures will provide that somewhere in the process. The claimant is entitled to examine plan documents, which will include the beneficiary designations. Litigation may follow the decisions on appeal under the claims procedures. Interpleader may be considered at that point.

Sorry, Peter. I am not going to respond to your request about what written QDRO procedures should provide with respect to incorporation of terms. I would have to spend a lot of time trying to deal with the issue of what constitutes a document. It is not as easy as counting staples. I do think it is appropriate to add to this thread that determination of qualification of a DRO and interpretation of a QDRO for purposes of implementation is a fiduciary matter. Persons involved on behalf of the plan in the process at any stage need to understand if they are acting in a fiduciary capacity or not. It would be a best practice to formally appoint the QDRO fiduciary, whoever that is, as a fiduciary to avoid misunderstanding.

Although I am critical of the drafting lawyer, I think it is an appropriate courtesy, as well as best practice, for the plan to communicate expressly that the awarded amount will not be adjusted for earnings and losses (setting the Fidelity problem aside). This is typically done in the notice that the DRO has been determined to be qualified and the relevant interpretations of how the plan will execute the QDRO. Given the communication history so far, that message might better be delivered in some other way before processing the DRO.

I agree with Calavera, except I am more emphatic that the divorce decree language deserves absolutely no consideration. If the divorce decree was submitted with some suggestion that it had meaning with respect to the domestic relations order, the plan should state, as part of its interpretation of the domestic relations order, that the divorce decree was not considered in the process of determining qualification or the amount of the award. I also believe that state law is irrelevant if it is an ERISA plan. If the DRO does not specify earnings and losses, then it is a sum certain. The participant’s opinion is irrelevant and the drafting lawyer is wrong if the lawyer expects an earnings adjustment. I hope that the account services/investment provider is not Fidelity. Unless Fidelity’s policies have changed since my last encounter, it is impossible to pay a specified sum to an alternate payee. However, as much as this offends me, there should be no harm because, in the end, the alternate payee should receive a bit more without the participant receiving less if no one interferes.

Good written QDRO procedures will provide that account assets other than the loan will be used to create the alternate payee’s subaccount. The risk of vesting and default fall on the participant, but the plan can make it stick. The alternatives are administrative nightmares.

A slightly different point, but reflecting all of the concerns previously noted. I assume an ERISA plan. When the plan started paying the portion of the interest that the participant was supposed to get, I don't see how that is anything but a failure to follow plan terms. The apportionment of the benefit can only be done under the auspices of a QDRO. I infer that what was done was based on the idea of a separate interest division of the benefit. The plan is disqualified. What to do? My best shot would be correction of a plan failure, and that correction would be based on putting the plan and participants and beneficiaries in the position that they would be in if the failure (no appropriate QDRO in place) had not occurred. So get a QDRO in place in the form that was imagined before the payments and then play it out from there. The participant started payment of the assigned interest in a form that was proper (presumably). It would be nice if the Alternate Payee had the ability to elect to start later (such as now), but that would depend on plan terms and I think most plans would require the AP to start when the participant's separate interest payments began. That would mean that the AP would get retroactive payments based on some form of benefit available to the AP (probably a single life annuity), plus earnings because of the failure receive benefits timely. I realize that this s pretty rough and ready, but if all the affected parties agree (Ha! Good luck with the Plan, but it has dirty hands and the prospect of disqualification looming) and execute properly, I would bet the IRS would swallow it, assuming discovery. I think the odds are good either way. Caveat: I have not followed any development in correction procedures, so I may be all wet. I also have the view, borne out by experience, that the IRS is pretty generous about good faith corrections. All that may have changed while I was asleep at the switch. Of course, this is not advice to anyone. One could argue that the appropriate correction is to recapture all the misbegotten payments to the participant and start over, or reform payments so the participant "catches up" on the payment of the unpaid portion of the benefit, with earnings, that should have been paid to the participant all along. I don't favor that approach, although it might be more technically correct. Are there any service providers or fiduciaries who may be liable for some contribution toward extrication from this mess?

While I think the move by TIAA sucks because the investment provider is in the best position to approximate earnings and losses from a specified valuation date and dumping the exercise on the divorcing parties is confusing and expensive, it highlights the reality* that the “usual” calculation earnings and losses from a date has almost always been somewhat illusory. Check some other posts in this forum about the use of algorithms for that purpose and how they can be rather inaccurate, depending on the circumstances. Perhaps it is unrealistic to expect true, rather than approximate, but reasonable, calculation of earnings and losses. Maybe the providers simply don’t want the exposure of appearing to look like they are doing actual and true calculations as opposed to reasonable approximations. This problem has been evident for a long time when a plan changes providers. If the valuation date is under the prior provider regime, the plan often has no means to go back into that history to bring down (up?) the calculations to the date the new provider is presented with participant balances, because, among other reasons, they did not think of it, was not an available service from the prior provider, or is not a service available from the new provider (who does not have all that historical data loaded into its system). The burden falls on the individuals to account for the gap between the valuation date and the commencement date with the new provider. *Disclaimer: I do not know the systems and methods of investment providers for calculating earnings and losses forward from a valuation date to a “transfer” or “separation” date. Others have asserted that imperfect algorithms are used. The assertions make sense to me based on my witnessing of third party attempts to calculate earnings and losses from the data of the investment provider. It is possible that some or most investment providers have systems that can actually provide accurate figures for earnings and losses from a valuation date to some other date. I have plenty of experience with plans that have changed providers and create problems for the individuals because of the difficulty of working with historical data that is no longer in an active system. One lesson from all of this is that if one divorces, the division of the retirement benefits should be attended to as promptly as possible. That will minimize many problems. Unfortunately, a QDRO is often an afterthought.

Please explain the Vanguard account. Is it an IRA that will receive a rollover of the distribution from the plan of the alternate payee account balance after the plan establishes and funds the alternate payee account?

If you make private equity funds available to the public, then you create money making opportunities for the private equity fund managers by opening up a category of money and unsophisticated investors that would not otherwise be preyed upon.