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.

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.

Appreciate your chiming in David. I did indeed. Permanent, non-modifiable maintenance (WA version of alimony) must be addressed in the divorce decree in this jurisdiction, so substituting a support QDRO would require decree modification. However, after getting to that point in the impasse, the plan finally qualified the original order as written this week, within 36 hours of me telling them the situation was quickly escalating toward litigation. One is inclined to conclude that good faith was not in their primary toolbox. Thank you all for the brainstorming, I am grateful.

I have the same sentiment QDROphile. I believe that, whatever else, this plan is counting on the fact that the cost to force them to comply well exceeds my elderly client's resources. However, if they don't do their duty, they can also count on pissing me off to the point I will sue them pro bono for their egregious self-dealing as it amounts to elder abuse. The plan is organized under Missouri law and I don't have colleagues there. I'm licensed in two states, one in the 9th Circuit and one in the 4th (WA not CA). Given the extreme political positions being taken in MO courts and the Supremes' encouragement of christonationalists, I'm not sure I would find many takers there for having a hard talk with a church organization about their legal positions, but if you have any colleagues there who may be interested, please do let me know. Thank you both for brainstorming. If anyone has further ideas, I'm listening, and I will return to post the outcome as well.