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Fees for QDRO review for 457 Plan


J Simmons

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For ERISA-governed plans, DoL FAB 2003-3 (May 19, 2003) allows plans to charge an individual plan account in a DC plan for administrative expenses pertaining solely to that account. That includes charging either the EE's or the ex-spouse's account for the costs of reviewing and processing a QDRO.

Treas Reg § 1.457-10© engrafts the QDRO rules of IRC § 414(p) into the 457b plan context.

However, I am unable to find anything that would permit a 457b plan to charge the employee or ex-spouse for reviewing and processing a QDRO. As ERISA is not at play to preempt state trust law, I'm wondering if anyone has run across this issue and concluded anything other than if the charge is reasonable, state trust law permits it to be charged against and paid out of the 457b plan trust.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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  • 9 years later...

I regret that I could not dig up the citation after some evidently inept searches, but it is an Oregon statute and I believe the maximum that a government retirement plan can charge for processing a QDRO is $300.  That belief is supported by administrative rules of several government retirement plans in Oregon (that I found easily) providing for a maximum $300 charge, which would be consistent with the statute.  The statute is a really good example of bad drafting for various reasons. 

I fear that  the bad drafting may result in uncertainty about applicability to government 457 plans, if that is where you are going.

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Under Oregon Revised Statutes § 243.507, an Oregon State or local government employer’s eligible deferred compensation plan “shall” pay money or deliver a right to an alternate payee as provided by a domestic-relations order the plan’s administrator received.  (Not all governmental plans provide for a non-participant following a domestic-relations order.)

 

That statute leaves the rulemaking, including allocations of plan-administration expenses, to the Public Employees Retirement Board or, for a local plan, its administrator.  Or. Rev. Stat. § 243.507(7); see also Or. Rev. Stat. §§ 243.472, 243.478.

 

An Oregon PERS rule states:  “The Deferred Compensation Program, when collecting administrative expenses and related costs, shall allocate those expenses and costs between the participant and the alternate payee on a pro-rata basis, based on the fraction of the account received by the participant or alternate payee.  The Deferred Compensation Program may not charge the participant and alternate payee more than a combined total of $300.00 for administrative expenses and related costs incurred in obtaining data or making calculations.”  Or. Admin. R. 459-050-0250(2) (“Fee for Administration of a Court Order”).

 

To return to J Simmons’ query, I might focus an inquiry in this order:

 

Does Internal Revenue Code § 457(b)-(g) preclude a QDRO-processing charge?  No, if the charge is reasonable and does not otherwise result in an exclusive-benefit violation.

 

Does the State’s enabling statute (a law that authorizes establishing and maintaining the plan) state a power or restriction?

 

Does a rule or regulation implementing or interpreting the enabling statute state a power or restriction?

 

Is the QDRO-processing charge logically consistent with the State’s statutory and common law of trusts?

 

What powers or restrictions (if any) are stated in the plan’s governing documents?

 

Information about “Using Plan Assets to Pay for Necessary Services” is in 457 Answer Book chapter 18—Fiduciary Duties to a Governmental Deferred Compensation Plan.

 

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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The $300 limit is in ORS 243.507(8).  The administrative rules of the plans, such as the PERS rule cited by Fiduciary Guidance Counsel are, and must be, consistent with the statutory limit.  Thanks for digging out that statute so I could see what I overlooked in my original search.

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QDROphile, thanks.  The $300 limit is in the statute, which a rule can't disobey.

Side observation:  Proposals for a selection I ran last year for a State's plan showed at least two competitors with QDRO-processing fees much higher than Oregon's limit.

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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