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QDRO - hard copy or electronic copy acceptable?


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Informal survey - do you permit participants to submit QDROs in electronic format (with raised seal visible) or do you require hard copy originals and why?  Thanks!

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The standard is a reasonable conclusion that the order is what it is purported to be.  That can be accomplished in a number of ways.  In the beginning, a court-certified copy was the gold standard, but fiduciaries did not always understand was that was, so date stamped documents were accepted even though various courts will date stamp any document that is put across the counter for filing (whether or not a court order).  In the days of sanctioned electronic signatures, nothing is compelling under ERISA  or the tax code about hard copy, but hard copy may be comfy in this world of alternate facts.  One could get comfortable with submission from someone who is reasonably determined to be a licensed lawyer if the lawyer states that the submission is an order of the court.  Lawyers are officers of the court in most states and, despite reputation, are not allowed to misrepresent court matters.  If a lawyer submits an order, electronically or in hard copy, with a statement that it is an order of the court, and it turns out to be bogus, then the fiduciary should report to the appropriate disciplinary body.  With respect to civilians, e.g. in a do-it-yourself order, the submission should be viewed skeptically, but if it appears legitimate on its face and no other contradictory evidence of cluelessness or malfeasance is present, a fiduciary can conclude that the order is legitimate.  Any uncertainty should be resolved in in a way that makes the fiduciary comfortable.  One does not want to be completely subjective, but a judgment is required.

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I've occasionally received draft DRO's via email, often sent by one of the attorneys.  While not perfect, it helps to see the the opposing counsel is CC on the email. 

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Since most often I have written the order for the atty, when it comes back to me signed by the judge, even if its a PDF sent via email, that's good enough for us to get the distribution paperwork going.  

If it was an order that I did not draft, I would check it and make sure it shows as signed and is submitted to us via a legitimate source (usually, the atty responsible for the drafting). If it looks ok,, we will process it.  

We have never had an issue with an order being provided that was "bogus".

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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We take scans of QDROs all the time.  They do need to have the various court markings and we like to see a cover letter by an attorney.  Since they come to us via our clients they have at least talked to the employee whose account it going to be separated.   If a participant were to send me a QDRO I would send it to the client to know they want it processed. 

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It annoys me when I submit the original order that I received from the court and the plan asks for a court-certified copy.  How can a copy be better than the original?  Also, as an attorney, I am an officer of the court.  A plan should be willing to accept my word that the order is what it purports to me.  It gets even worse when someone at the plan says something like, "how do we know you didn't change it?"  That is effectively accusing an attorney, who is an officer of the court, of falsifying a court document.  That said, I understand why they do it.  In the long run it is easier to follow their rules than try to buck the system.  

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Whether it’s forgeries of purported death certificates or of purported court orders, that people present forgeries is a continuing problem in administering retirement plans.

 

Let’s extend EHE’s survey.  Imagine a plan administrator’s QDRO procedure does these things:

 

It deliberately delays a decision on whether an order is a QDRO until at least 31 days after the date of the order.  (Among other reasons, an administrator might set this to get some likelihood that times to seek whatever kinds of reevaluations the court might allow have expired.)

 

It mails the decision to four persons:  the participant, the participant’s representative (if there is one); the proposed alternate payee, the alternate payee’s representative (if there is one).

 

It doesn’t separate the accounts or benefits until a month after a QDRO approval, allowing whoever might be harmed by a forgery (or some other defect) a little time to act on the situation.

 

Would these procedures get some guards against forgeries?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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18 hours ago, QDROphile said:

The standard is a reasonable conclusion that the order is what it is purported to be. 

It seems to me the standard is whether the plan administrator satisfied ERISA's fiduciary standards in accepting the order.  

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12 minutes ago, RatherBeGolfing said:

Would you say that the fiduciary standard is higher than @QDROphile's "reasonable conclusion" standard?

I don't know about higher.  It is different.  If you satisfy ERISA's fiduciary standards and make a mistake (e.g., pay the wrong person), the plan is still in the clear.    If you satisfy the reasonable conclusion standard and make a mistake, the plan is not in the clear unless satisfying that reasonable conclusion standard also satisfies ERISA's fiduciary standards.  (I use "pay the wrong person" only as an example.  I recognize it would be difficult to satisfy ERISA's fiduciary standards and still pay the wrong person.)  

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On 5/30/2018 at 10:25 AM, ERISAAPPLE said:

I don't know about higher.  It is different.  If you satisfy ERISA's fiduciary standards and make a mistake (e.g., pay the wrong person), the plan is still in the clear.    If you satisfy the reasonable conclusion standard and make a mistake, the plan is not in the clear unless satisfying that reasonable conclusion standard also satisfies ERISA's fiduciary standards.  (I use "pay the wrong person" only as an example.  I recognize it would be difficult to satisfy ERISA's fiduciary standards and still pay the wrong person.)  

Good point. I do think the two go hand in hand though.  Can you make a reasonable conclusion (as it pertains to our QDRO discussion) without satisfying ERISAs fiduciary standards?  I can't come up with an example where when one is met and the other is not.  

 

 

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On 5/30/2018 at 10:48 AM, RatherBeGolfing said:

Good point. I do think the two go hand in hand though.  Can you make a reasonable conclusion (as it pertains to our QDRO discussion) without satisfying ERISAs fiduciary standards?  I can't come up with an example where when one is met and the other is not.  

ERISA's fiduciary standard is more process driven, whereas it seems a reasonable conclusion standard is results oriented.  

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I think you are making a distinction without a difference.  The reasonable conclusion presumes compliance with ERISA’s fiduciary standards.  Since the ERISA fiduciary is always subject to the ERISA standards (which are mostly concerned with process), a fiduciary cannot come to a reasonable conclusion without regard for ERISA and ERISA informs, or even defines, what is reasonable.  The point is that the fiduciary does not have a bright-line test (e.g. court-certified paper copy) and must make a judgment about what to accept based on the circumstances.

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I wanted to remind myself about the standards ERISAAPPLE mentioned, so here’s two points:

 

ERISA § 206(d)(3)(I):  “If a plan fiduciary acts in accordance with part 4 [“Fiduciary Responsibility”, ERISA §§ 401-414] of this subtitle in—(i) treating a domestic relations order as being (or not being) a qualified domestic relations order, or (ii) taking action under subparagraph (H) [to separately account for amounts that might be due an alternate payee], then the plan’s obligation to the participant and each alternate payee shall be discharged to the extent of any payment made pursuant to such Act [ERISA].”

 

ERISA § 404(a)(1)(B):  “[A] fiduciary shall discharge his duties with respect to a plan . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims[.]”

 

How does this change any preliminary thought about which steps might be prudent or imprudent in discerning whether a writing is an authentic court order?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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1 hour ago, Fiduciary Guidance Counsel said:

I wanted to remind myself about the standards ERISAAPPLE mentioned, so here’s two points:

 

ERISA § 206(d)(3)(I):  “If a plan fiduciary acts in accordance with part 4 [“Fiduciary Responsibility”, ERISA §§ 401-414] of this subtitle in—(i) treating a domestic relations order as being (or not being) a qualified domestic relations order, or (ii) taking action under subparagraph (H) [to separately account for amounts that might be due an alternate payee], then the plan’s obligation to the participant and each alternate payee shall be discharged to the extent of any payment made pursuant to such Act [ERISA].”

 

ERISA § 404(a)(1)(B):  “[A] fiduciary shall discharge his duties with respect to a plan . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims[.]”

 

How does this change any preliminary thought about which steps might be prudent or imprudent in discerning whether a writing is an authentic court order?

 

Peter, those are the provisions of the statute I was thinking of when I posted my comment about the fiduciary standard.  

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And ERISA § 206(d)(3)(G)(ii) states: “Each plan shall establish reasonable procedures to determine the qualified status of domestic relations orders[.]”  (The statute doesn’t say the procedures must be written, only that the plan must somehow “establish” them.)

 

If an administrator uses written procedures, the administrator might consider whether the procedures document should describe (or deliberately not describe) what kinds of evidence the administrator uses to consider whether a document submitted is a court’s order.

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Even if a plan’s fiduciaries have reduced their risks of liability (and the plan’s obligation regarding a mistake) to none, is it still worthwhile to reduce further a risk that a plan acts on a false document (if it’s feasible to do so with almost no incremental plan expense)?

 

If so, is my idea about a little delay, communication, and time to respond an effective way to get someone else’s check against a false document?

 

Is there some reason it’s a bad idea?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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On ‎5‎/‎29‎/‎2018 at 4:24 PM, Larry Starr said:

Since most often I have written the order for the atty, when it comes back to me signed by the judge, even if its a PDF sent via email, that's good enough for us to get the distribution paperwork going.  

If it was an order that I did not draft, I would check it and make sure it shows as signed and is submitted to us via a legitimate source (usually, the atty responsible for the drafting). If it looks ok,, we will process it.  

We have never had an issue with an order being provided that was "bogus".

Um... so  the order provided really wasn't bogus? What does bogus really mean here then? http://www.lifebuzz.com/quotations/

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On 6/4/2018 at 2:15 PM, KEB said:

Um... so  the order provided really wasn't bogus? What does bogus really mean here then? http://www.lifebuzz.com/quotations/

I'm afraid I don't understand your reference.  Is your problem with the scare quotes, or a real pension question?  My comment is precisely talking about my practice history and that, in fact, we have never found an order to be bogus; thus, the scare quotes.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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