blguest

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.

Bill, of the 327 QDROs I wrote last year alone, 93% of them were property divisions equalizing the parties' financial positions with respect to retirement monies. Of those, better than 22% affected an abused spouse, and of those abused spouses, all but 2 of them were women. Among those 327, in only 2 cases were women's retirement savings greater than their spouses, and the court ruling to equalize their financial positions did not create a windfall for an abuser. Support QDROs I wrote for that period were limited in scope and duration, and all were written providing support to women who earned less than their spouses, or children who would have gone without basics but for the support orders that were possible only because the affected plans had spousal consent requirements, and turned away participants who would see their own children hungry and homeless. The measure of "undeserving spouses" (abusive or willfully unemployed with no children at home) affected favorably by QDROs I've written is vanishingly small in my experience (less than 4 in thousands), and I've been at this for 25 years. So, might it happen? Sure. Does it happen much? No. In a perfect world, women and men would earn the same pay for the same work, and both would be represented equally in careers having comparable retirement benefits. That is not the world we live in. I cannot even count the number of times a litigant (mostly men, but not all) cashed out their 401ks in the month or two preceding marital separation in order to dodge the application of marital property law, and I've then had to tell divorce counsel no QDRO is possible because of it. The disenfranchised spouse then loses everything because a plan had no rule requiring spousal consent, leaving state family courts unable to apportion marital assets, or provide support for children.

Beyond a plan having an annuity form of benefit triggering the necessity of a QJSA, there are the more fundamental legal reasons of ownership interests and potential support obligations, so I would urge the trustees to think carefully about that before amending the plan to remove spousal consent requirements. In community property states, as well as in many common law states, money earned from employment during marriage is marital property, and that includes deferred compensation. A marital community stands in the shoes of a co-owner of deferred compensation, not in the shoes of a creditor -- a major distinction that should guide the trustees' thinking. Additionally there are spousal and/or dependent support interests that are often addressed in family law litigation and paid via 401k loans, QDROs, and distributions, which, without consent requirements, are destroyed, and always to the detriment of those most in need of the protection afforded by consent requirements. The only reason I can think of to do away with a spousal consent requirement is a conscious, extrajudicial decision to undermine family law, in a way that is abhorrent to public policy.

Peter is the plan organized for a federal entity, or is the defendant charged under federal law? If so, would 18 USC 3613(c) help?

Did the defendant steal plan monies or other, unrelated employer property? What do the plan rules have to say about benefit forfeiture, or eligibility to participate, or disqualifying events? Has any of the benefit been assigned in a QDRO? A naked exclusive-benefit rule does seem to weigh in favor of the defendant's argument, and a legal status as as a defendant agreeing to pay restitution for a wrongful act doesn't seem to change that. However, assuming a distribution made, the distribution then becomes an item in the defendant's attachable asset landscape -- because once distributed, that money is immediately subject to attachment. A creative prosecution can attach those funds when distributed faster than the defendant can blink. Even if the defendant doesn't survive his shame (snark caveat), his estate can be sued if enough money is at stake to make it worth the effort. I had a client who was a former spouse under a FERS order make a claim sounding in equity several years ago when the employee lost his FERS benefit by operation of 5 U.S.C. § 8312. In that case, 5 years post-decree the employee was discovered having done some very bad things, for which he forfeited his pension, and my former client having moved by then, made a claim for her portion with counsel in another state, which was partially denied. I learned about it in a holiday greeting card last year from one of her children, who wrote to inform me she died of covid. Life has a way of not being fair.

More than that, MoJo, retail and institutional investors alike need a regulatory scheme that protects them from crypto investors, who have a growing ability to destabilize markets. Virtual currencies like crypto can never be legitimate legal tender in the way fiat currencies are because they represent no value that is other than intrinsically claimed by virtue of their existence. That makes them utterly unsuitable for retirement account holdings. Wise words indeed. I differ though in allowing Fidelity off the hook, because Fidelity's requesting DoL rescind its guidance is not simply a sexy move by an innovative marketer which is not a fiduciary, it is a Machiavellian ploy by a powerful firm, with which fiduciaries have a good faith relationship to handle their assets, to maximize its own short-term profit no matter the cost to others. That position brings echos of a certain politician's claim that his "innovative" (mostly unlawful) tax avoidance schemes "makes him smart".

IRC 408(m) should be amended to address the issue. Some proposed amended language: (m) Investment in certain items treated as distributions (1) In general The acquisition by an individual retirement account or by an individually-directed account under a plan described in section 401(a) of any collectible or of any virtual currency shall be treated (for purposes of this section and section 402) as a distribution from such account in an amount equal to the cost to such account of such collectible or virtual currency. (2) Collectible defined .... (3) Exception for certain coins and bullion .... (4) Virtual currency For purposes of this subsection, the term "virtual currency" means a digital representation of value designed to function as a medium of exchange, a unit of account, or a store of value, or a combination thereof, for which the digital representation is not a claim to physical legal tender, but which claims intrinsic value by design. --- Edited to add that the underlined portions are the only changes to the existing statute needed.

Likely because classes of investments offered before now for useful diversifiers were not readily identifiable ponzi schemes. DoL warned this past March against crypto in retirement assets because crypto's velocity of voluminous volatility is the poster child for imprudent investing. (I call it the V3 asset class.) I think the senators know that the losses will be huge, as will the outcry when it happens, and are engaging in prelitigation strategy with a deep pocket which will be able to pay for those losses. In April, Fidelity requested DoL rescind its guidance on crypto, saying DoL's guidance failed to offer "meaningful substantive help for plan sponsors", that DoL overstepped its bounds by concluding plan sponsors couldn't act in the best interest of their employees while including digital assets in retirement plans. Fidelity's self-serving and defensive position re the guidance reminds me of the "logic" espoused by a former client ,who was a meth cook, about only serving a ready market. Plan sponsors as fiduciaries are about as likely to avoid crypto as my former client's distributors because many will adopt Fidelity's posture to pass the risk on to Joe Lunchbox.

That seems to me the trickiest part of your scenario David, and requires a creative and highly-competent estate counsel's input. Every point Peter made is important. Certainly in a community property state, and likely some common law states as well, an anti-nuptial agreement is required to achieve some of these goals. In states where wills of nondeceased persons can be filed with the recorder or the court, the agreement should be filed along with the wills with the court having jurisdiction. The reasoning underlying anti-nuptial agreements (which the supreme court has also used in a QDRO context) is that some forms of property only arise in a marital context, and therefore a pre-marital agreement cannot address the disposition of that property as the couple involved do not have those rights to dispose of prior to marriage. It is also good practice to do so for older clients to help protect them from potential heirs' later claims of undue influence. --- Edited to say, with egg on face, not only did I mean post-marital, not ante-nuptial, but unsupervised autocorrect compounded my error to make ante anti. The horror, heh, though all you polite people ignored the faux pas.