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Incorrect QDRO Disbursement


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A QDRO was submitted and calculated for the time of the marriage for 401k disbursement. The amount due was approximately $26,500, and a "clerical" was made and the receipant was cashed out in the amount of $67,000, more than was the ending balance at the time of separation. Participant was not notified and found error on own and brought it to the attention of 401k company. Since the money was wire transferred into the bank account as cash and an overpayment of $40,000, approximately 3 weeks ago. What are the ramifications? Can the funds be withdrawn automatically from the bank account and placed back into the participating 401k? What if the funds have been spent and are not paid back?What about lost interest future earning? Is the 401k plan responsible for the error and replacing funds regardless?

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Plan Sponsor could utilize the overpayment rules under EPCRS.  Since this is not a small amount, the Plan Sponsor would be required to seek return of the overpayment (adjusted for earnings) from the AP. The overpayment is required to be returned to the Plan regardless.  Either the Plan Sponsor (or the rules say another person) can contribute the money if not returned from the AP. At that point, a decision can be made what next steps should be taken to recoup the money from AP

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Adding to Madison71's comment, the QDRO may have language addressing this situation. At the very least, it may help bolster a letter to the alternate payee if you have specific language in a court order requiring return of the funds. There's also likely language in the plan document explaining the plan's right to recover overpayments.

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On 6/28/2018 at 10:05 PM, Dr0713 said:

A QDRO was submitted and calculated for the time of the marriage for 401k disbursement. The amount due was approximately $26,500, and a "clerical" was made and the receipant was cashed out in the amount of $67,000, more than was the ending balance at the time of separation. Participant was not notified and found error on own and brought it to the attention of 401k company. Since the money was wire transferred into the bank account as cash and an overpayment of $40,000, approximately 3 weeks ago. What are the ramifications? Can the funds be withdrawn automatically from the bank account and placed back into the participating 401k? What if the funds have been spent and are not paid back?What about lost interest future earning? Is the 401k plan responsible for the error and replacing funds regardless?

Movement needs to be fast; the AP can be sued and should be immediately (even before waiting for a voluntary response) to prevent him/her from spending the loot.  Then, hopefully, the recipient will return the funds that are not his/hers and all will be ok.  The recipient is no more entitled to the funds than if your bank deposited $100,000 into your account by error and you withdrew it and spent it before they figured it out. 

You need competent counsel on this one, and FAST.

It is not likely that the funds can be withdrawn "automatically".   You will need the recipient's permission to take anything out of his/her account (even if it was by error; the bank involved does not want to be a party to this issue, unless the court enjoins it).

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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  • 1 month later...

I waited 2 years to file QDRO. Judge signed the QDRO (which was provided by the retirement company holding the 401K) stating that funds would be distributed (50%) with gains or losses at date of distribution. My ex-husband took me to court on the grounds that he signed the QDRO in error, seeking $22K, my share of the "gains" over the two years between divorce and distribution. I did not receive notice of court date and therefore did not appear in court. The Judge, who had signed the QDRO, ruled in favor of my ex and ordered me to pay the $22. I contacted the retirement company and they are sending me a detailed distribution. I also spoke to the Judge's secretary and she said that since I did not receive notice, I could write a letter requesting a conference.

Question: How is it legal for the Judge to go against the QDRO he signed and order me to pay the $22K? 

I believe I will have to obtain an attorney for the Judge to take this seriously.

 

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This question is not appropriate for this forum. You need your own lawyer; we don't answer for Judge's behavior.

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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