blguest

Thanks Peter, I have an earlier edition of that, and also Shulman's handbook, both of which are helpful but neither of which provide much insight on this issue. I also haven't had any luck with searching similar cases on Fastcase or even Google scholar. I think that of PA's who want to insist on particular benefit division formats, most of which are reasonable, they do not get much pushback precisely because they are reasonable, and if one makes the point that under some circumstance or another that accommodation needs to made, most are reasonably accommodating. It is only in this case among the thousands of others I have come across that the PA's position is unsupportable. As none of our neighbors here have identified any authority that might support the PA's position either, I think what happens next is, if the plan's counsel wants to back the PA's decision, a judge will qualify the order, which will then be served, prequalified, on the plan. The plan will then either do the calculation or continue to refuse, prompting a formal claim for benefits, which the PA may also refuse, at which point the remaining option is federal court. My experience with federal courts is that they tend to read the federal statutes strictly, though of course past experience doesn't guarantee future results. A strict reading of § 206(d)(3)(C)'s subsection (ii), with its multiple "or"s, and a lack of published legal interpretation supporting the PA's refusal, could be helpful, but hopefully it won't get that far if the PA wants to avoid litigation. Sigh. Thank you all for your input and insights, and if you think of anything else, I'll be grateful to hear it, even if critical.

You would be right @Artie M that amending a QDRO would be easier, assuming the numbers are available to an alternate payee with which to do the math. The problem arises when the denominator is not available to an alternate payee. The numbers for a benefit in pay status are always available to a PA though, in this case one who refuses to cite any authority for rejecting a coverture fraction, making writing a QDRO that carries out a garden-variety property division impossible for such an alternate payee. Do you know of any authority permitting an ERISA plan administrator to reject DB orders using such a fraction, without citing any justification other than they just won't do it?

@Peter Gulia I have met those judges too Peter. The question remains though, can you or any neighbors here think of any authority that permits an ERISA plan administrator to reject DB orders using a coverture fraction, without providing any justification whatever, other than they just won't do it? If anyone can think of such authority, I am open to learning what it is. I agree that less expensive and more effective means are usually preferable (particularly in the current political climate), and certainly there are never any guarantees in litigation. However, it seems to me that forced means are not limited to subverting parties' rights, a plan administrator's 'meh' undermining many states' domestic relations schemes without any authority is a problem much larger than one QDRO. @fmsinc Thanks for relaying your experience David. Like you, I push back, and in this case already requested they escalate the matter to plan counsel. We'll see what that individual has to say.

@david rigby, I always review a plan's procedures. In this case, while I requested the plans' procedures, the PA did not provide them and instead provided the plans' model order for a benefit in pay status (identical for both plans). The plans' model does not explicitly prohibit fractions, it instead has fields for amount or percentage. Please help me understand under what authority do you (and QDROphile and Peter) see an ERISA plan being able to circumvent § 1056(d)(C)(ii) by refusing to do the math required by the statute's explicit grant of "manner in which such amount or percentage is to be determined", as long as that manner is clear? Yes to @Peter Gulia, these are definitely ERISA plans and their 5500s are in order. Are you thinking here that § 1056(d)(C)'s "clearly" negates its own subsection (ii)'s explicit grant of methodology when that methodology is clearly defined, and executed in the present orders, as a matter of longstanding industry practice?

Hi Effen, yes I am sure. They stated they will not qualify an order using a fraction for any benefit in pay status, they will only consider hard numbers (straight percentage or dollar figures). They had no issue with the architecture of the fraction or its presentment, only that it was in use at all, which is what has me here canvassing for others' thoughts. As I read § 1056(d)(C)(ii), and of course the plan document, their demand has no legitimacy, but as it is always possible that those here with experience on the PA side of things may have ideas I haven't considered, I'm all ears. The weird part is that these are not small or new or specialized plans. That the sponsor is a quasi-governmental entity, albeit the plans being purely ERISA creatures, may have something to do with it, but the PA must still administer the plans properly.

Thanks for your thoughts QDROphile. Courts frequently divide DB benefits by application of a coverture fraction, aka the time rule application to the marital portion of a benefit (X is assigned 50% of the marital portion of Y's benefit). Most folks here are aware that the fraction defines a marital portion of a benefit, the numerator representing a length of a marital period and the denominator representing the entirety of a benefit. A QDRO defines these elements precisely so that a plan can calculate the portion allocated to an alternate payee. The plan admin could not cite to any plan document provision exempting them from the application of 29 USC § 1056(d)(C)(ii) (manner in which such amount or percentage is to be determined), and I'm not seeing how the application it of creates any kind of problem for an ERISA DB plan. Of course, some plans may not want to do the math, even though that stance costs litigants (both plan beneficiaries) more money, but that does not give them an out from the statute for qualifying an order. You see it differently though, it seems, and I would appreciate your further thoughts on why. The time rule / coverture fraction exists because parties to a QDRO always know the numerator, but almost never know the denominator. For a benefit in pay status, the denominator is part of the plan's records, and may be known by the participant, but alternate payees and courts almost never know it, and plans are not forthcoming with the data in the absence of participant cooperation. As participants are frequently not around, or have died, that information remains out of an alternate payee's reach, making doing the math impossible for all but the plan.

Anyone ever come across an ERISA DB plan administrator who refuses to qualify QDROs employing a time rule (coverture fraction) division for benefits in pay status? I am dealing with one, first one ever in 30 years of practice. All comments welcome.

A situation that can become an infinite loop when a claim is in the wings but is not ripe to be made. For example, a QDRO-in-waiting that has not yet been submitted for qualification because a sponsor/participant's estate (which has already submitted letters testamentary to the TPA and stands in the shoes of the deceased sponsor/participant), cannot get the TPA to provide a current account statement. I have a client with that very issue right now (you may recall I'm a QDRO lawyer). Trustee sponsor/participant of very small plan dies after the court enters a property settlement, scant paper records in the decedent's estate, no copy of an executed beneficiary form; estate counsel pretty much ERISA-clueless. Sponsor company has a DC plan TPA'd by one firm, and a cash balance plan administered by another TPA. The cash balance TPA won't pony up a current account statement to the estate administrator/PR, so neither the estate nor the alternate payee for that plan can ascertain what exactly is there that is divisible between the estate and the alternate payee. Then, instead of providing a current account statement and their QDRO procedures document, the TPA decides, unbidden, to retain its own counsel to write a QDRO for the alternate payee (!), which, shocker, does not allocate the full components of the benefit, though nothing in the plan document prevents full allocation. (Of course, I would not allow my client to sign such an abomination.) Additionally, the cash balance TPA's benefit statement from several years ago (the only statement the estate has), is labeled for the sponsor's DC plan (the one administered by a different TPA), includes a single line item for the cash balance plan without identifying that plan as distinct from the entire rest of the statement. This is not a small-estate matter and there is likely 500k+ in the participant's hypothetical account. In 30 years of practice, I have never seen a TPA screw up this badly. I'm counting the misrepresentations, fiduciary breaches, and prohibited transactions, and wondering when they'll stop shooting themselves in the foot before I sue their pants off, as they're not listening to reason. Thank the stars original poster Santo Gold has the wits to ask their learned colleagues here for their thoughts when unsure.

I'll rob from Paul here to pay Peter. Paul makes an important point in emphasizing negative consent, which from a plan participant's perspective looks very different from Peter's perspective of advising a plan sponsor. In evaluating a course of action for my own clients, I always put on opposing counsel's hat to determine what their responsive legal argument might be before I make my own argument. For example, if a plan participant is going sue a plan and its fiduciaries, that participant's counsel will home in on actions taken that are arguably not in the best interests of participants, which could be shown by introducing the kinds of evidence you list in your third post, Peter. In particular, negative consent-basis actions would appear to a litigant to be a ripe target for close scrutiny, especially if an end result has demonstrably detrimental effect on participants. So yes, from a legal perspective, I would think a prudent plan fiduciary has a responsibility to consider those possible outcomes before instituting a practice that has many known unknowns and the result of which have the potential for damaging participants. If a plan participant sues, be prepared in discovery to show plan fiduciaries considered potential outcomes. Even with lots of plan policy communications to participants, jurists will consider whether the average plan participant is likely to understand them.

My client (a divorce lawyer) asked me to write a QDRO for their client who has a solo-401k plan containing real property. I advised a plan audit is needed because of entwined interests in the real property, and entanglements with other real properties that are not plan assets (and are in another state), as I'm not going to write a QDRO for that client until those interests are sorted and all cards are on the table. So, I'm seeking recommendations for auditors with experience with solo 401ks owning real property in multiple jurisdictions. Washington State or Virginia licensure may be required. Please send me a message on-platform if you have any names to offer, thanks.

David, § 838.237 doesn't grant rights the Boggs court didn't. Boggs ruled that a would-be alternate payee has to be alive at the time a DRO is qualified, while § 838.237 deals instead with provisions in a COAP approved prior to a former spouse's death.

@david rigby 5 CFR § 838.234 - Collection of arrearages https://www.law.cornell.edu/cfr/text/5/838.234 5 CFR § 838.235 - Payment of lump-sum awards https://www.law.cornell.edu/cfr/text/5/838.235

Try the Tax Foundation (https://taxfoundation.org/)

@Peter Gulia Peter, I almost always put full contact data (address, voice number, email) in the signature blocks of stipulated QDROs, in addition to the addresses given earlier in an order, and I provide them again in cover letters to plans when I send all certified orders to them. Because most all QDROs are sealed orders here in Washington, they're not on the court’s public record. In cases in which a protection order is in place (sadly there are more and more of them), I leave the protected party's address and other contact data out of an order and give PAs full contact information for the protected party in the cover letter alongside the admonitions to not disclose the protected party's data. Like David, I always advise parties to stay in contact with PAs as well. If there is a QDRO on file, a PA can also contact the attorney who wrote a QDRO to ask for updated contact information. Most attorneys will keep client files for six years, sometimes longer, depending on the circumstances.

LMR, it sounds as if you're paying support in the form of an allotment. It is important to know whether your obligation is for property or for support. If your divorce decree only ordered you to share retirement benefits as property, then you should have pursued an MRPDO (military retired pay division order, which is the military version of a QDRO). This is because when paying a former spouse directly from retired pay by allotment, you are paying monies on which you've already paid tax, but with paying through an MRPDO, the DFAS will pay a former spouse directly, and the former spouse will have the tax liability rather than you. Examine your divorce decree to see whether the money you were ordered to pay was characterized as support or as property. If property, then you need an MRPDO, but if support then your allotment is proper. When the DFAS pays a portion of retired pay as property and the order is for a percentage, it will automatically include COLAs, but if the order is for a dollar amount, then DFAS will not add COLAs. If your decree is silent on the property vs support characterization (rare) but indicates COLAs should apply, then a reasonable interpretation is for property division rather than support.