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Distribution from defined ESOP for Alt Payee


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Spouse and I agreed to divide all assets and holdings prior to non contested divorce. I gave up everything on my side within the first 90 days. The other side dragged their feet and it took a year, The last remaining piece we were negotiating was their ESOP. I had agreed to equalize everything on my side so as to be entitles to 50% of their account balance. I tried to get the QDRO drafted and approved, with the correct language, prior to the Decree but was given the run around on the actual language of the "plan" multiple times. Spouse was able to get a "default decree" signed by the Judge without my knowledge. I was served papers and didn't have a valid QDRO in place.  I was able to contest on the ground of misrepresentation, but only allowed to file a QDRO post Decree, The Plan administrator finally accepted the QDRO after a year of attempts and is giving me some harsh feedback on my ability to get any information as to distribution of any kind. What are my rights? They are setting up a sequestered account at the trustee bank. I have only the amount of shares I am entitled under the ESOP. With shares value under the equalization, it is supposed to be over 245K. No other papers have been sent to me as of Dec 24 2016.  Any help would be greatly appreciated. I am 30k into legal fees and exhausted.

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It is hard to understand what your question or concern is.

Are you the participant or the alternate payee in the ESOP?  (Or put another way do you work for the ESOP company or the former spouse of the employee?)

Do you think you are entitled to a distribution from the ESOP?  If so, be aware ESOPs work on their own pace.  If the company's stock is not traded on an exchange they have to go get the stock appraised and all the annual work done.  This might not be done until the summer or even some times the fall.  I work with some ESOPs that won't make payments for the 12/31/2016 plan year until Nov/Dec of '17.  I have some that will be starting in May.  

Also be aware even with a QDRO a plan isn't required to pay you until the terms of the plan say so.  This can be years in the waiting.  (Assuming you are the Alternate Payee)

So if you wouldn't mind answering my questions, it might help in getting you better answers.  Either way, it sounds like you think you have shares in an ESOP.  They should respect your request for a copy of the Summary Plan Description (SPD) if you have shares in the plan.  This should give you some basic idea of how the plan is run.  It also tells you who the Plan Administrator is so you can focus future questions towards the correct party. 

See if they can give you any idea when participant statements are issued for the plan for any given year.  Don't be shocked if they come back and say next summer or fall (it could be this spring).  But at some point you should get a statement saying how many shares you have and what they are worth if the QDRO gave you a benefit or you had to give up a benefit to someone else..

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Greetings,

Thank you for the prompt response.

Your assumption is correct, I am the Alt Payee. The initial purpose for me to agree to half of their ESOP was to free up cash for debt and cost of living during the transition. I was informed prior to the Decree that the ESOP was a defined "plan" and that a lump sum would be payable immediately after valuation.  (After the QDRO was approved) When the Judge signed the Decree, the cooperation from the administrator ceased, it then took a year for me to get the QDRO approved. Is there a way to compel them to give me the terms of the "plan" ASAP, or do I need to wait until they have the annual audit and send the statement out to all share holders? They have sent me a Statement reflecting my segregated shares and a valuation dating to the 2015 audit, but nothing regarding current value and options for distribution. Thanks in advance.

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There is no reason for them to not give you a copy of the Summary Plan Description (SPD) upon request.  It will at least give you some idea who distributions work although it might not address Alt Payee directly.  You have a right to an SPD.  So I would push for one. 

I would ask them again to describe to you when they think you can start to be paid.  Be aware if the stock isn't publicly traded on an exchange they might not know the current stock price until it is appraised.  That can take months in the best of plans and until the summer for most. They should be able to give you a general idea.  Something like "...we typically make the payments in the fall and it is our understanding you will get distribution forms then."

In the end, once you get the SPD if they really just refuse to work with you the SPD will describe who you send a formal written claim for benefits.  Once you start the process they are obligated to tell you if you are due a benefit or not and why/why not.  Send a written claim for benefits certified mail and compel them to at least reply to you. 

Lastly, you can always file a complaint with the DOL.  I never recommend going to them first.  It is a pretty hostile move and people tend to lawyer up in response.  Also, it is the government, so it doesn't move fast.  There is also a good chance they are following the law and plan document just no communicating that fact well so you might not get the response you want. 

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Check the SPD carefully about payout terms. I work with one that will not allow any distributions until 5 years after the employee (not the alternate payee) has terminated employment. The good news is that if something like that is the case, you will receive any investment earnings during that time.

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K2retire mentions something I has said in passing above and it is worth repeating.  That is why I would start by asking if when they think they will pay out.  They don't have to pay you the year after the QDRO but some time down the road.  But they should be willing to give you an idea what the triggering event is to start the payments. 

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