blguest

acm's note above about the withdrawal restriction is spot on, and in the context of benefit divisions for QDROs, can wreak havoc on or completely derail property divisions for unsuspecting parties to a divorce, and their lawyers. TIAA calls their flagship product so affected by the moniker "TIAA Traditional Annuities" (TTAs). I routinely write QDROs allocating as much of the assigned benefit as possible from the non-TTAs portion of benefits held by the participant, whenever possible. Disentangling marital property is normally high-priority task for divorcing parties, so most parties are only too glad to structure their QDROs this way. However, there are too many cases in which the participant holds most of their plan investments in TTAs, forcing property divisions of limited assets to be dragged out over many years. One would think plan sponsors have enough collective clout to pressure TIAA into modifying their entrenched rules on TTAs because it causes so much hardship for participants going through life changes.

Hi David, yes, there is nothing mysterious about DC loans not being loans in the traditional sense, nor how they are treated in QDROs. The question, which I likely could have posed in a less oblique way for better clarity, is whether some plans treat non-defaulted loans as "vested", even though you and I would not consider loaned-out money as "vested" because it isn't liquid or available for payment to an alternate payee. The reason I asked Benefits Link neighbors the question is because I have seen some plans' documentation containing specific language stating as much, while others have (unofficially) stated they consider non-defaulted loans to retain their vested character unless defaulted. That latter interpretation seems nonsensical to me, particularly with respect to property division cases. Perhaps others here could enlighten us both.

I remember seeing that language in contexts other than for IRAs, Peter, so your surmise Vanguard may have used it in a 401(k) context is probably correct. They did use it in a 403(b) context as of 2008-2010 as well: https://hr.ucf.edu/wp-content/uploads/sites/17/Vanguard-Application.pdf.

Believe it or not Peter, that's a Vanguard choice their lawyers must have made after partying too hard. See: https://investor.vanguard.com/investor-resources-education/beneficiaries/adding-beneficiaries-to-ira

Based on documents from several different plans, I've operated under the assumption that a participant's non-defaulted loans from a DC plan reduce the vested portion of a total account balance, even though they do not reduce the overall total account balance for other purposes, such as for calculations of assignments to alternate payees (except where the loans would limit the assignable amount), because non-defaulted loans are considered assets of an account, even if they reduce the vested portion. Am I wrong, or do different plans handle this in different ways?

Hi David, I think you are right that you are in the minority on this. Your notes in the files you attached ask the question whether a plan has the right to limit the benefits awarded pursuant to state law, and it appears the focus of your inquiry turns on your reading of 1056(d)(3)(B)(ii)(II). The statute provides “domestic relations order” means any judgment, decree, or order made pursuant to a State domestic relations law, and it does not include a carve-out for estate proceedings. You may be focusing on state domestic relations law as driving the boat, but neglecting to factor the federal nautical chart and industry currents. A central theme in Boggs is that a would-be-QDRO issued in a non-domestic-relations context such as an estate matter does not fall within the definition of 1056(d)(3)(B)(ii)(II), because such an order is not made pursuant to domestic relations, but to devise and descent, even if the expectation originated in an earlier domestic relations matter. This is why most plans will not qualify an order for a would-be alternate payee who predeceases qualification. Also, most states' devise and descent laws have at least some treatment of the kinds of property that may inure to an estate, and expired expectations are not usually among them. Just my 2 cents, fwiw.

I'd maybe try inquiring of Spark or ICI. I think you can email them at glossary@ici.org.

1. Yes, if your QDRO tells them to divide the benefit in that way as of the account segregation date, then all assets in the account as of that date will be affected. 2. It depends on state matrimonial law. Most states have either statutory provisions for this or court rules that specify what a retirement benefit division order like a QDRO can and cannot achieve, and most limit that to carrying out existing court orders, such as carrying out a divorce decree incorporating a property settlement agreement, because the function of a QDRO is to do just that. 3. Because the time to negotiate a different outcome than that memorialized in your MSA and now incorporated into your divorce decree has come and gone.

Second Carol's first sentence, though you may want to send it to plan counsel before responding to it. FWIW, there are two recent appointments on the bench at the USDC Albany, both magistrates, both with prosecutorial backgrounds, if that's where the order came from.

A recordkeeper that exercises discretion in making a decision about a participant's eligibility for benefits, as described above by EPCRSGuru, is not performing a ministerial act but is unilaterally assuming the mantle of a fiduciary. At the very least, the plan sponsor and administrator should review their services contract with that provider to determine an appropriate response, because no response implies consent or acquiescence.

FormerEsq: Did you miss "duty of care" and "if they operate in a fiduciary capacity within ERISA's ambit"? Exercising discretion by making an overpayment falls afoul of §404(a)(1)'s mandate of the duty of care.

Hi David, is yours the "Admiral" favor of the fund? The variants seem to have different inception dates. The "ballpark" method is one the parties came up with (at the suggestion of their divorce lawyers), and that I advised against, but people will do what they will do. In general, when early statements are unavailable for a marital property division but parties do know a beginning and ending balance, many of their lawyers will want to take that beginning, premarital separate property balance, factor in EE/ER contributions at some agreed static level for each (monthly or annual) period, add investment experience for each of those periods per a fund's published return, to arrive at something resembling PV, then subtract that PV separate property portion from the balance on the day the parties separated, to then arrive at a marital portion to be divided. It's the kludgy method for parties who cannot afford to hire an economist of some sort.

@FORMER ESQ. By "prosecute" I meant, as part of their duty of care, to engage, investigate, take on, or pursue, rather than having a duty to file a criminal complaint. Between ERISA, the IRC, SarBox, and SEC rules, recordkeepers exist in a highly-regulated environment requiring constant vigilance to maintain the viability of their liability insurance. If they operate in a fiduciary capacity within ERISA's ambit and do not follow up properly on rectifying their mistakes having overflow effects on plan sponsors and administrators, they risk regulatory, financial, and potential criminal penalties. EPCRSGuru is right to consult with plan counsel.

Hi Peter, your comments are helpful, as always. I did suggest using the S&P returns for the same reason you cite, that the same plan investment array in earlier periods cannot be known with any certainty without documentation. The participant says they only ever had that one fund, and it does appear by that exact name on the earliest statement they have (2003). While Vanguard should know best what the inception date of any of their funds is, the participant said they had that investment as of 1997, never changed it until the first plan merger in 2005, and stockanalysis.com gives that fund's inception date as Aug 31, 1976 (See https://stockanalysis.com/quote/mutf/VFIAX/). I believe there are/were different flavors of the Vanguard 500 Index Fund, with the "Admiral" flavor being one variant. I like your idea of using a five basis points lower than S&P measure as a yardstick and will suggest that if they can't come to some agreement without all this fuss (which has been ongoing for over a year, sigh.) Thanks much!

VFIAX = the "Vanguard 500 Index Fund Admiral". I have a client for whom I'm calculating a marital portion of an old 401k containing that single investment. That 401k has undergone some mergers and recordkeeper changes such that historical statements for individuals are no longer available. The parties agreed to ballpark the present value of the premarital balance, and to estimate that premarital balance by working backward from a later balance by subtracting annual fund overall returns on that single investment. Whether or not this is the right/smart way to approach it is not the issue, finding the historical fund returns is. (I'm a lawyer rather than a math person, but I can run a spreadsheet with reasonable competence.) The annual returns sought on that VFIAX fund as a whole are for the years 1997-2003. I have been able to locate overall fund returns back to 2003, but not before that, and would be grateful if anyone happens to have those. Suggestions and criticisms are also welcome.