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QRDO Quandary


ldr
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Good morning to All,

Have you ever had a case where no DRO or QDRO was ever done, yet the participant is demanding a distribution?  This is a first for me.

One of our clients has a 401(k) plan with a participant who was an unwilling party to his divorce.  He says his ex wife "did it all" - hired the lawyer and paid for the divorce.  The lawyer made a one paragraph passing reference to the participant's retirement account in the Marital Settlement agreement.  "Respondent has a retirement plan with XX Company.  Upon distribution of the funds in this plan,  Respondent will direct the Plan Administrator to divide the funds equally between the Respondent and the Petitioner, that being 50% to each party, however distributed."  That's it.  

The participant has now terminated employment and claims to be in very dire straits and wants his half of his money RIGHT NOW so he can move in two weeks.  He does not know or care how a DRO or a QDRO might eventually be created and he does not particularly care about the rules and regulations we are all trying patiently to explain to him.  He has stated that he most certainly is not going to pay any lawyer to do a DRO.

His HR department knew enough to call me as the TPA, send me a copy of the marital agreement and question whether he wasn't supposed to have a QDRO before anybody could get paid.  I knew enough to alert John Hancock not to process any termination requests from this person and effectively "freeze" his account until we can get this all sorted out.

What the participant wants is for the Plan Administrator (the employer/ Trustee, effectively) to liquidate his account, send half to his ex and half to him, tomorrow if at all possible. 

I do not know of any legal way to accommodate this participant, but I thought I would run it up the flagpole to see if any of you have ever processed a marital division of an account without a QDRO.  I have certainly never heard of any such thing.

Your advice is appreciated, as always.

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My guess is the lawyers who know more about QDROs will leave comments at some point but here is my take.

What do we know at this point?

You have a participant who is terminated.  You don't have a DRO or a QDRO.  There might be one coming but you don't know that for sure.

What does the law and plan document say? 

You clearly have a distributable event for this guy that would entitle him to 100% of the funds in the account.   Is there something in the plan document, QDRO procedure or law that says something different? 

I have seen plans with QDRO procedures that say if the plan get notified there might be a future DRO to put a hold on the account for 90 or 180 days.  After that wait the hold is up and the plan goes on using normal procedures.  Does the plan or procedure have any such rule?  If so, follow that rule and part of the document/procedure.  If not, on what basis are you not paying this person 100% of the money in his account? 

A well written document or QDRO procedure ought to guide you through this so let us know what if anything they say.  There is a good chance it answers your question. But at some point the document says this guy is entitled to be paid 100% of the benefit in the plan for him unless someone can point to something that says otherwise. 

That is how I would look into this. 

As for your final question:  No I don't think this guy can arbitrarily say just pay me 50% and wait for the ex-spouse to show up with a QDRO to pay the other 50%.  He is entitled to 100% of the money since he is termed or something in the plan documents is saying you can put a hold until a QDRO is produced or some time limit is hit.  

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Pardon me while I bark first.  Your ignorance about QDRO law and procedures probably prevented the practical solution that I offer below. Your should refer QDRO questions out to someone capable of advising about QDRO administration.  That said, your standard of understanding and competence is about average in the industry, so don't take it too hard.

What should have happened is the participant should never have shown the papers to the plan.  The order (and it is a domestic relations order) applies only to the participant and has nothing to do with the plan.  It orders the participant to pay half of the distribution to the former spouse.   This may be stupid or pretty sneaky on the part of the former spouse; it changes the tax consequences and I pass on that issue.  The direction has nothing to do with the plan.  But the participant DID give the order to the plan, so next what should have happened is the plan (or its adviser) should have recognized that the plan was not implicated and bent the strict processing procedure and conclude that it has not received a domestic relations order and therefore it should process a distribution to the participant in normal course.   The plan should not accommodate the participant's request to split the distribution check in any way -- the plan needs to completely disregard the order to keep itself clear.  The entire distribution is to the participant -- just as the order says.

You probably cannot now restore Humpty Dumpty.  You have started processing the order as a domestic relations order.  You may have to continue, especially since you jerked  John Hancock's chain.

If you understood QDRO processing, there is still a way to get the participant a distribution of half of the account right away, even while processing the domestic relations order that is not going to be qualified.  I will refer you to section 414(p)(7) to give you ideas, but I am not going to spell it out.  You need a shock to your system to make you understand that you are not competent to deal with QDROs and you should seek professional help that you or the plan pays for to extricate yourself from this mess.  Or not.  You can just let the participant dangle while you process the domestic relations order under usual procedures.  The participant brought it on himself by not participating in the divorce.

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Hi ESOP Guy,

Excellent and thought provoking answer that has raised a host of new questions.  The plan document and the written QDRO procedure are just peachy once we actually have a DRO.  They are both silent on what happens when you know a DRO might be in the works.

Does that little paragraph I quoted from the marital settlement agreement somehow constitute a DRO that just doesn't happen to be a QDRO yet because it does not contain all the ingredients to be qualified?  I don't know.

I don't know what the legal obligation of the employer was to send us the marital settlement agreement and I don't know what our legal obligation is to stop anything from happening to the funds until the issue can be addressed.

Looking at it from your perspective, maybe both we and the employer are in the wrong for freezing his account, since there is not DRO.  (Unless that little paragraph is a DRO).

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3 minutes ago, ldr said:

They are both silent on what happens when you know a DRO might be in the works.

That is 100% the intent of the person who drafted the document / QDRO procedure.  There is nothing in the law that allows you withhold funds from a participant with a distributable because you know or suspect or have heard rumors of a DRO maybe being drafted.  Language like yours is clear cut.  If you have a DRO you hold the assets until you determine if you have a QDRO.  If you dont have one, you pay the participant.  

10 minutes ago, ldr said:

I don't know what our legal obligation is to stop anything from happening to the funds until the issue can be addressed.

Unless your document tells you otherwise, you don't have one.  In fact, you would be withholding a distribution to a participant with a valid claim for the benefits.

 

 

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At the risk of being picky, before making any payment to the participant, make sure he has reached a date on which payment could be made.  Just because he "...has now terminated employment..." does not automatically mean he can be paid now.  RTDD.

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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@RatherBeGolfing, thank you.  That makes sense.  @david rigby, I see your point.  Under the terms of the plan document, he is now eligible to be paid out, when he has completed his withdrawal form.  He would have been treated like any other terminated participant and paid his full vested account balance "as soon as administratively feasible" after his date of termination and completing his form, had it not been for his HR department sending us his marital settlement agreement.

I understand all of the kind advice given, and I understand QDROphile's blistering, scathing attack as well.  From what you all are saying, it would appear that the participant is entitled to withdraw 100% of his funds.  The problem I see with this is that If the participant does not give his ex-spouse 50% of the proceeds, are we as the TPA or the HR department of the client somehow going to be held liable when the ex-spouse comes complaining?  We can't say we didn't know.

It would appear to be time to consult with the ERISA attorney we have on retainer for thorny issues.

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3 minutes ago, ldr said:

... had it not been for his HR department sending us his marital settlement agreement.

If the document/QDRO procedures require receipt of a QDRO, the HR departments actions here does not matter

4 minutes ago, ldr said:

The problem I see with this is that If the participant does not give his ex-spouse 50% of the proceeds, are we as the TPA or the HR department of the client somehow going to be held liable when the ex-spouse comes complaining?

Not if you followed procedure.  Ex spouse should have acted to protect her entitlement.  Her legal issues are with participant.

 

 

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5 minutes ago, ldr said:

RatherBeGolfing, I believe you, but we still have a call in to the ERISA attorney just to see what her take on all this is. I will post her reply if it turns out any differently than what has been discussed so far.

 

The ERISA attorneys I know personally tell me all the time it is often cheaper to call before then after and a fix is needed.  Over the decades experience has taught me they aren't being self-serving here.  

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2 minutes ago, ldr said:

RatherBeGolfing, I believe you, but we still have a call in to the ERISA attorney just to see what her take on all this is. I will post her reply if it turns out any differently than what has been discussed so far.

 

Oh I would too, no worries.  Beyond that, I also think a review of your internal procedures would be prudent.  I won't be as scathing as @QDROphile, but I think this case has illustrated that you may have a knowledge gap that should be filled, or certain situations should be turned over to someone else. 

 

 

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Personal insight from me for what it is worth. 

I would see if the powers to be at your firm are wiling to start to work on a basic QDRO policy you can offer to your clients.  You can use this to see an area where it would have been nice to have had a written procedure for the client in place before the fact.  

I will be the first to admit not all the ESOP clients I work with have a good QDRO policy.  As you say at times it takes all you have to keep up with the normal day to day flow of things. 

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6 hours ago, ldr said:

Good morning to All,

Have you ever had a case where no DRO or QDRO was ever done, yet the participant is demanding a distribution?  This is a first for me.

One of our clients has a 401(k) plan with a participant who was an unwilling party to his divorce.  He says his ex wife "did it all" - hired the lawyer and paid for the divorce.  The lawyer made a one paragraph passing reference to the participant's retirement account in the Marital Settlement agreement.  "Respondent has a retirement plan with XX Company.  Upon distribution of the funds in this plan,  Respondent will direct the Plan Administrator to divide the funds equally between the Respondent and the Petitioner, that being 50% to each party, however distributed."  That's it.  

The participant has now terminated employment and claims to be in very dire straits and wants his half of his money RIGHT NOW so he can move in two weeks.  He does not know or care how a DRO or a QDRO might eventually be created and he does not particularly care about the rules and regulations we are all trying patiently to explain to him.  He has stated that he most certainly is not going to pay any lawyer to do a DRO.

His HR department knew enough to call me as the TPA, send me a copy of the marital agreement and question whether he wasn't supposed to have a QDRO before anybody could get paid.  I knew enough to alert John Hancock not to process any termination requests from this person and effectively "freeze" his account until we can get this all sorted out.

What the participant wants is for the Plan Administrator (the employer/ Trustee, effectively) to liquidate his account, send half to his ex and half to him, tomorrow if at all possible. 

I do not know of any legal way to accommodate this participant, but I thought I would run it up the flagpole to see if any of you have ever processed a marital division of an account without a QDRO.  I have certainly never heard of any such thing.

Your advice is appreciated, as always.

ESOP gave gave you a great answer; the other responses have also pretty much hit the target EXCEPT for the comment about now that you have started dealing with a DRO with Hancock you somehow are stuck.  No you are not, and you need to tell Hancock there is no QDRO.  The spouse's problem is with HER LAWYER; she (and her lawyer) needed to perfect her right to 1/2 of his retirement money. There is a very specific legal process for that (it's called a QDRO) and they did not do that.  Barring that, there is NO QDRO; he is not married; he can get all his money and then she will have to sue him for her share.  

The lawyer who wrote this: "Respondent will direct the Plan Administrator to divide the funds equally between the Respondent and the Petitioner, that being 50% to each party, however distributed" clearly did not know what he was doing and probably is guilty at a minimum of malfeasance and more likely malpractice.  But that's NOT the plan's issue.  A marital settlement document cannot authorize the participant to tell the PA to do something that is not legally permitted.

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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Larry, thank you for a great response too.  Now in the meantime, the ERISA attorney and HR lady from the client's office have weighed in and the results are as follows:

The ERISA attorney actually said that it was "probably prudent" of us to have had John Hancock freeze the account until we could see what was happening.  She went on to suggest that the participant either get an attorney to do the DRO or take a stab at filling out his own DRO and getting the judge to bless it as a QDRO, AFTER we compare it to a checklist of ingredients to be sure everything is in it. (This is a very poor state where a lot of people do their own legal work).  The incentive to do this is taxes.  The participant's account has $60,000 in it.  ERISA attorney agrees that as it stands right this minute, he does indeed have a right to a total distribution, but that he will pay 20% up front to the feds, he will owe something to the state whether he pays it now or at the end of the year, and he will also owe the 10% penalty for not being 59.5.  He will be paying the taxes for both himself and his ex-wife.  With so much to lose, he has every incentive to get a DRO one way or another.  

Meanwhile HR lady told us that the reason she sent us his marital settlement agreement was that she had recently been through a divorce and she recognized the document as a boilerplate, do it yourself divorce document.  She knew that the part about the retirement plan couldn't possibly be "right".  She had also tried unsuccessfully to persuade the participant that he should not be paying his ex-spouse's taxes for her, but he didn't understand her.

We have advised the participant that he can take his full distribution, pay all of the taxes for himself and his spouse, or, he can come up with a DRO and avoid paying her taxes.  It's his choice and we will do whatever he decides he wants.

It's been an interesting day!  Thank you to everyone who helped with the topic.

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11 hours ago, ldr said:

Larry, thank you for a great response too.  Now in the meantime, the ERISA attorney and HR lady from the client's office have weighed in and the results are as follows:

The ERISA attorney actually said that it was "probably prudent" of us to have had John Hancock freeze the account until we could see what was happening.  She went on to suggest that the participant either get an attorney to do the DRO or take a stab at filling out his own DRO and getting the judge to bless it as a QDRO, AFTER we compare it to a checklist of ingredients to be sure everything is in it. (This is a very poor state where a lot of people do their own legal work).  The incentive to do this is taxes.  The participant's account has $60,000 in it.  ERISA attorney agrees that as it stands right this minute, he does indeed have a right to a total distribution, but that he will pay 20% up front to the feds, he will owe something to the state whether he pays it now or at the end of the year, and he will also owe the 10% penalty for not being 59.5.  He will be paying the taxes for both himself and his ex-wife.  With so much to lose, he has every incentive to get a DRO one way or another.  

Meanwhile HR lady told us that the reason she sent us his marital settlement agreement was that she had recently been through a divorce and she recognized the document as a boilerplate, do it yourself divorce document.  She knew that the part about the retirement plan couldn't possibly be "right".  She had also tried unsuccessfully to persuade the participant that he should not be paying his ex-spouse's taxes for her, but he didn't understand her.

We have advised the participant that he can take his full distribution, pay all of the taxes for himself and his spouse, or, he can come up with a DRO and avoid paying her taxes.  It's his choice and we will do whatever he decides he wants.

It's been an interesting day!  Thank you to everyone who helped with the topic.

I think the answer you have gotten is perfectly in line with just about what everyone said.  If he doesn't want to get the QDRO done so he can save paying her taxes, then he gets the whole amount distributed. However, if he is going to give her half as the property settlement contemplated and is not trying to stiff her (which it appears is the case from what he has previously requested), he can certainly pay her the half AFTER THE TAX BITE so it doesn't cost him extra. I haven't seen that mentioned as an option, but I think it is absolutely there for him.

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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One hopes that the participant will receive a copy of the "Special Tax Notice" so he will have some information about taxation.  Perhaps he will even consider doing a rollover, thus giving him a greater degree of control over the timing of his taxation. Perhaps he will even consider spreading his IRA withdrawals over 2 (or more) years which might help to minimize the tax impact.

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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16 hours ago, ldr said:

We all were under the impression that once you knew, no matter how you knew, that an alternate payee had a right to part of a participant's account, the account was supposed to be frozen lest the participant run off with the alternate payee's balance.  We now know better, but that doesn't make us stupid, ignorant, or bad administrators.  We are darned good administrators who seldom process QDROs and never pretended to be attorneys.

I never said stupid, ignorant, or bad admins.  I simply stated that this situation has identified an area that you may not be fully equipped to handle and that you should use this to make improvements.  If you only get a handful of QDRO situations each year, maybe it makes more sense for you to outsource the review process instead of filling that knowledge gap in house.  That is not a put down at all, it is just reality and we all have to do it (big and small shops).

 

 

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RatherBeGolfing, I had no issue whatsoever with anything you said.  My issue is with QDROphile, who is simply rude, and not even 100% accurate in all the advice he gave.  Responses like the one he gave will drive away people who might otherwise have participated on this forum, and will make many more into "lurkers" who read the information but don't dare speak up for fear of being ridiculed for asking questions in the first place.  Even I am going to step back and read from now on and try to solve all of my questions on my own.  I don't say I will never put up a question again - management may require it - but not if I can find any other alternative.

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30 minutes ago, ldr said:

RatherBeGolfing, I had no issue whatsoever with anything you said.  My issue is with QDROphile, who is simply rude, and not even 100% accurate in all the advice he gave.  Responses like the one he gave will drive away people who might otherwise have participated on this forum, and will make many more into "lurkers" who read the information but don't dare speak up for fear of being ridiculed for asking questions in the first place.  Even I am going to step back and read from now on and try to solve all of my questions on my own.  I don't say I will never put up a question again - management may require it - but not if I can find any other alternative.

Fair enough, I just wanted to clarify what I said in case it came off as rude or dismissive.  

Good Luck

 

 

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1 hour ago, ldr said:

RatherBeGolfing, I had no issue whatsoever with anything you said.  My issue is with QDROphile, who is simply rude, and not even 100% accurate in all the advice he gave.  Responses like the one he gave will drive away people who might otherwise have participated on this forum, and will make many more into "lurkers" who read the information but don't dare speak up for fear of being ridiculed for asking questions in the first place.  Even I am going to step back and read from now on and try to solve all of my questions on my own.  I don't say I will never put up a question again - management may require it - but not if I can find any other alternative.

I agree with ldr here.   I don't mind a certain bluntness in answers, I am also very thick skinned so my blunt could be another person's rude.   However, I try do make sure initial answers are not rude.   It is for the reason I think people should be encouraged to answer.  Even if you give a wrong answer you ought to be encourage to give an answer.  You should learn from the other answers if you are wrong but that is really the only way to learn here. 

I know for a fact you can search my answers over the years where I have gone back and edited my answer to say something to the effect:  I have edited my answer to nothing as I have been shown to be wrong in my first answer.  Sorry for the confusion I may have caused.  

That should be good enough and encouraged.  That is how everyone learns. 

And in the case of this forum the number of truly dumb questions is very small.   So all questions ought to be encourage to be asked. 

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"My issue is with QDROphile, who is simply rude, and not even 100% accurate in all the advice he gave. "

Yes, I was rude.  It ticks me off when service providers cover matters that look manageable from the middle of the road in an off-the-shelf form-based world.  QDRO practice in particular is tricky because the action is generated (1) in state court under state law either by (2) lawyers who are often not competent in this technical area or (3) untrained individuals in an environment usually involving great (4) emotional and (5) financial stress, all the more reason for the adviser to the QDRO fiduciary to have a broad and deep understanding beyond just the checklist aspects of qualification in order to minimize the complications at the plan level.  Even the Department of Labor gets a lot of QDRO stuff wrong. 

So where are you right now?  Unless you believe that the plan fiduciary or employer should take a paternalistic approach to deciding what is right or best for the participant (which I will not quarrel), the participant has been hung out with at least delay against his rights and wishes (as imprudent as they may seem to the experts).  It could have come out differently, allowing the participant to manage his own life, even in desperation.  The original post seemed to ask how to get the participant what the participant wanted.

I was rude, but I am teachable.  I responded without knowing what might be provided in the plan's  written QDRO procedures, but I bet it would not make a difference, notwithstanding some astute comments by others concerning policies about action to be taken upon the receipt of a domestic relations order or the suggestion of an appearance of a domestic relations order.  What was not accurate about the advice I gave?*

*As for Larry Starr's disagreement with my warning about falling into the pit of unnecessarily engaging John Hancock, I was stating possibilities.  He is correct that John Hancock should simply follow instructions from the appropriate fiduciary, but (1) we have no information about John Hancock's actual role or responsibilities, and (2) a lot of institutional service providers overstep their role and improperly interfere unless they are happy in their own minds with the proceedings.  I wager that Mr. Starr has had to read the riot act to an officious provider about respecting the instructions of the appropriate fiduciary or compliance in some other fashion.

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1 hour ago, QDROphile said:

"

*As for Larry Starr's disagreement with my warning about falling into the pit of unnecessarily engaging John Hancock, I was stating possibilities.  He is correct that John Hancock should simply follow instructions from the appropriate fiduciary, but (1) we have no information about John Hancock's actual role or responsibilities, and (2) a lot of institutional service providers overstep their role and improperly interfere unless they are happy in their own minds with the proceedings.  I wager that Mr. Starr has had to read the riot act to an officious provider about respecting the instructions of the appropriate fiduciary or compliance in some other fashion.

 

 

Never more than twice a day! ?

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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@QDROphile:

On the whole, the outcome so far was extremely positive and came the closest to satisfying absolutely everyone concerned.  Yesterday we sent the participant the John Hancock withdrawal form for himself as a terminated participant, the Special Tax Notice, AND the boiler plate QDRO document that our ERISA attorney allows us to share in special cases.  He called back today with a few questions on how to fill out the form, and then he was off to court to see what he needed to do to get this thing blessed by a judge and turned into a QDRO.  He finally understands the tax consequences of merely taking a distribution of the entire account first and he wants to avoid that if he can.  It remains to be seen whether he can get a judge to approve the DRO in the time frame that he needs.  He's not trying to escape paying the ex-wife.

At the moment, everyone is satisfied.  The client and we as the TPA are not worried about being sued by the ex-wife.  The ex-wife, who, as it develops, has been bugging the participant about getting her share, now knows that there is movement on her case and it should be resolved soon.  The HR department at the client's office knows that we've done our dead level best to take care of both them and the participant and the ex-wife and that's what they wanted.  The participant "gets it" about his taxes and has opted to try to do the QDRO.  He knows he can always default to taking all the money and paying all the taxes if absolutely necessary due to time constraints.

I appreciate the professionals who replied yesterday and I respect their expertise and advice, even if I don't agree with all of them.  My one exception is you.  You may have had some good ideas, but you delivered them with so much venom and sarcasm that the effort to "help" was lost.  If you enjoyed belittling me and my efforts yesterday, then I hope you had fun.  You won't get another opportunity.

As for the accuracy, there were only two points with which I do not agree.  First, the notion that we have no responsibility to do anything at all until we receive a genuine DRO does not play here.  Our client expects us to listen, care, and take action of some sort when she alerts us to the fact that there something in the works with a divorce.  Our ERISA attorney said it was "probably prudent" to freeze the account until it could be sorted out.  We have stopped kicking ourselves for doing that, and we will assess each case individually and make our best decision in the future as to whether to do that or not.  Yes, many of our employers are paternalistic and with good reason.  We have no quarrel with that.  Plus, our clients, and we, do not want to go to court over an ex-spouse's claim to a benefit that we approved to be paid out to a participant.  It really does not matter that we would have technically been "right" because we did not receive a DRO or a QDRO.  We would still have to spend the money, hire a lawyer, and use valuable time to go win the case.  The other point with which I disagree is that "jerking John Hancock's chain" brought down some kind of adverse circumstance.  It did not, and there is no problem there.

And that is all I have to say on this subject, except that I will update the thread when I find out the ultimate outcome of the situation.

 

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Here's how you can make the husband  happy and save him some money.  

First, the Plan is not going to distribute anything to anybody now that they know there is an Agreement that I assume was incorporated in the Judgment of Absolute Divorce.  They will insist on a QDRO so like it or not a QDRO will be necessary.  

Second, if the QDRO is issued by the Court giving 50% to his ex-wife then at that point he can take out his 50%.  BUT, the ex-wife's 50% will be taxable income to her but will not be subject to the 10% early distribution penalty.  AND, his half will be taxable income to him and, if he is under 59-1/2. it WILL be subject to the 10% penalty.   

Third:  Assuming he is under 59-1/2 and therefore subject to the 10% penalty, the parties should amend the Agreement to give her 100% ot the 401(k) and provide that she will divide the net after tax amount she received 50/50 with the husband.  That will save both of them the 10% penalty.  And there are no tax consequences to the transfer from her to him.  

I have done this on may occasions to get money into the hands of the Participant penalty free.  And the law is clear that the Plan Administrator is not required, or even allowed, to look behind the motivations of the parties.  My favorite case is In Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011)
https://scholar.google.com/scholar_case?case=4019345202025914766&q=brown+v.+continental+airlines&hl=en&as_sdt=20000003
Continental alleged that a number of pilots and their spouses obtained "sham" divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan that they otherwise could not have received without the pilots' separating from their employment with Continental.  The pilots were allegedly acting out of concern about the financial stability of Continental and the fear that the Plan might be turned over to the PBGC and that their retirement benefits would be substantially reduced.   


    By getting divorced, the pilots were able to obtain QDROs from state courts that assigned 100% (or, in one instance, 90%) of the pilots' pension benefits to their respective former spouses.  The Plan provides that, upon divorce, if the pilot is at least 50 years old (as all the pilots in this case were), a former spouse to whom pension benefits are assigned can elect to receive those benefits even though the pilot continues to work at Continental.  (Think “separate interest” annuity allocation.)  The former spouses presented the QDROs to Continental and requested payment of lump-sum pension benefits.  After the former spouses received the benefits, the couples remarried.  
    Continental sought to obtain restitution under ERISA Section 502(a)(3).  The Court of Appeals noted that ERISA § 206(d)(3) limits the QDRO qualification determination to whether the state court decree calls for benefit payments outside the terms of the Plan. It rejected Continental’s expanded reading of § 206, concluding that plan administrators may not question the good faith intent of Participants submitting QDROs for qualification.


    But the opposite may be true in U.S. v. Brazile, No. 4:18CV56 RLW, United States District Court, E.D. Missouri (2018) - that you can find at - 
https://scholar.google.com/scholar_case?case=10011356851935590761&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:14880692104701005079:AAGBfm2qi1_JaXLJvydb4f3quYTnTlLkbA, where Steven Brazile was convicted of securities fraud and, as part of his plea agreement with the Government, he acknowledged owing restitution in the amount of $3,902,880.85.  The Government imposed a lien against his property and rights to property under 18 U.S.C. § 3613(c).  

    It seems that among Steven’s assets was a pension plan.  Steven’s wife, Lorraine, filed suit for divorce and as part of the settlement the parties agreed to the entry of a QDRO transferring 100% of the plan benefit to Lorraine, thereby putting this asset unavailable for Steven’s restitution obligation.  
        “ In September 2017, probation officers conducted a home visit at Defendants' home and discovered that Steven Brazile and Lorraine Brazile are living together with their children and are raising their kids together as a "family." (Id. at ¶ 28) The Government contends that this demonstrates that the Defendants entered into a "sham divorce" to transfer assets to Defendant Lorraine Brazile that could have been used to pay victim restitution. (Id. at ¶ 29) On January 12, 2018, the Government filed a three count civil Complaint against Defendants alleging fraudulent transfer in violation of 28 U.S.C. § 3304. (Id. at ¶¶ 30-44).”

The case came before the court on Steven and Lorraine’s motions to dismiss or for summary judgment.  The judge allowed the case go forward.    

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