QDROphile

You can only roll over a payment that is an eligble rollover distribution. Generally, annuity payments are not eligible rollover distributions. As Cusefan advises, you need to look at exactly what the distribution options are, and it does not look good from the texts you sent. It is part of unfortunate plan document practices that plans include language that simply reflect certain legal requirements, whther or not the language/requirements are actually relelvant to that particular plan and the way it is designed. The language in your QDRO also matters relating to when you can start benefits even if the participant choses not to start. Look in the order to see if it mentions ability to start your benefits at the participant's "earliest retirement age". Frankly, if it is not there, and there is not a specific reason for it not to be there, I think it is malpractice on the part of the lawyer who drafted the provisions of the QDRO.

“Of course, there are details.” An all-purpose caveat and rejoinder. And appropriate.

Well-drafted plan documents will expressly provide for the plan administrator (the fiduciary one) to have authority to interpret the plan. Best practice is for the plan administrator to memorialize the interpretation of the plan terms for administering an elective deferral that exceeds the available amount net of all other deductions and elective reductions from gross compensation, if the plan documents otherwise do not adequately deal with the priority. Make sure to be comprehensive. E.g., determine where elective deferrals stand relative to section 125 elective reductions. If the interpretive authority is not express, it is implicit in the law, and increases the importance of the fiduciary's assertion and memorialization of the authority and the interpretation.

The trustee in bankrupcty is responsible for all claims against the employer and either will know what to do or will have to figure it out. Some fiduciary is responsible for asserting the plan’s claim for contributions.

Beware looking at any legal authority from California. California has a very troublesome approach to QDRO procedures and matters that make what happens in California almost useless in other states and the object of contempt from ERISA practitioners and the DOL. The DOL was unsuccessful in challenging California procedure in a “federal” court in the sovereign nation of CA. But the DOL is really weak in QDRO law generally.

Potential big difference for securities law compliance. If anyone cares. Document providers and TPAs typically don’t care. One wonders if the SEC or state enforcers care. Which is why you are wondering WTF this post is about.

Interesting sidelight for those who know: The [at least at one time] controversy over whether or not the QDRO scheme applies to welfare benefit plans. Some people, including juudges, could not seem to read ERISA 206(d)(1) before interpreting (d)(3).

Which would be a rational way to approach the issues, but I have been unable to find any authority for that outcome. Thinking outside of published authority, I can understand that the “age” of the Roth IRA controls rather than the age of the incoming rollover. It is much less administrative burden on the IRA provider to measure only from the inception of the IRA, which is within the records of the provider. If outside money determines the time compliance of the funds in the IRA, the IRA provider is put in a more difficult position to understand and verify the age of the outside money.

Set up a Roth IRA this year. Worst case, do a minimal (based on the IRA provider requirements) Roth conversion. That will start your 5-year clock. After the 5 year period is acheived, then you can roll over to the Roth IRA. That may not be very appealing, for example, if you are trying to avoid required distributions relating to the 401(k) plan, but you reported that you are age 62. However, it keeps your ripened Roth money available, subject to the distribution options of the 401(k) plan, during the less-than-5-year wait on the conversion IRA.

Not perfectly clear, but probably, if the Roth IRA is new.

No one has suggested amending the QDRO procedures. If one is timid, integrate the amendment with Luke Bailey‘s suggestion. And while the administrator is at it, add provisions for dealing with a non-spouse QDRO and with withholding on the distribution to the non-spouse AP.

I agree that if the plan receives the divorce judgment or some other "paper" from the proceeding, the plan should treat it as the receipt of a domestic relations order and follow the process for determining qualification. In fact, this is a good protective tactic by the would-be alternate payee to buy time necessary for the drafting of a would-be QDRO if that drafting and submission to the plan is delayed.

Authority: 1. The statute, both IRC and ERISA provisions speak only to what happens if a plan receives a domestic relations order (not notice or whiff of an order). 2. Schoonmaker v. Employee Sav. Plan (Amoco) 987 F.2d 410 (7th cir. 1992), which interprets the statute literally and narrowly and imposes liability on the fiduciary for restricting distribution based on less than receipt of a domestic relations order. Note that the DOL either has never read the case or the statute or does not believe the words on the page and takes a position similar to that described by fmsinc. I think the DOL view of fiduciary responsibility in these matters is wrong as a matter of law and implementing the DOL position is problematic and not solved by the magic of "actual knowledge".

Unless the plan (1) received a domestic relations order, or (2) shot itself in the foot will ill-advised provisions in its QDRO Procedures (possibly inspired by the ill-advised suggestions of the Department of Labor), the plan has no duty to inquire about anything in domestic relations proceedings, including compliance with terms of any decrees, orders, or judgments, including an order to prepare a domestic relations order that is intended to be a QDRO.

Is the LLC a disregarded entity?

Thank you, Mike.

The section 409 regulation means that the AP's account, as a subaccount of the participant's account, is subject to required distributions based on the participant's age/status, not the AP's age. Food for thought: The "subaccount" concept is consisitent with IRC section 414(p)(3)(A), and, if extended, suggests that, for example, if the participant takes a total distribution, then the AP cannot continue to retain the "balance" of the original (pre-QDRO) account. However, there is possibly an inconsistency with that concept (and its extensions) and the ERISA provision that the AP has the status of a beneficiary, which suggests that the AP can maintain a balance in the plan after the participant balance is gone, just as a death beneficiary can maintain an account after the participant's death, subject to the required distributio rules, of course. The plan can be designed to avoid the interesting questions about limitation by just allowing an AP to have the same rights as a participant with respect to the AP's account, independent of the particpant, except with respect to the required distribution rules as provided in the section 409 regulations.

The person who is the trustee needs the fear of ERISA instilled. Funny, I mostly spend time trying to counter unwarrented fear of ERISA.

The inquiry starts with the trustee, I suppose. If the trustee is not an institutional trustee, then the lessons about fiduciary responsibility and liability and formalities may begin here. If the trustee is an institutional trustee, but claims to be a directed trustee, some learning is warranted within the institution. Institutional directed trustees are usually overstepping officious intermeddlers. That is a different problem.

Your lawyer should either know what ESOP Guy stated or should associate with a lawyer who does for purposes of the QDRO. Sometimes the plan cannot determine values as of certain dates, especially distant ones, e.g. because of a record keeper change. You will have to deal with the plan for alternatives, but that probably will not happen.

Why can't you do anything with your account? It makes no sense that failure to submit a domestic relations order would have any effect. A qualified plan does nothing without a domestic relations order unless it is ill-advised enough to impose restrictions based on an informal notice of an imaginary order, and then it has only a reasonable period that restrictions may be imposed pending receipt of a domestic relations order. Since you mention only deferred compensation, are you talking about nonqualified deferred compensation? in that case, QDRO rules do not apply, although the employer may establish something resembling QDRO rules for the division of deferred compenstion. Still, if the employer does not receive anything relating to the presentation of a "QDRO", the employer shoud not be taking any actions or compromising any of your rights relating to your deferred compensation. Another approach is to proceed yourself with the preparation of the order, consistent with the terms of your divorce proceeding. Let her object. That will bring her on track for the preparation of the order. In any case, start with contacting a lawyer who is competent in QDRO matters. Your need starts with local domestic relations law, probably California, especially if the former spouse still resides in California.

As suggested by Effen, the determination and interpretation is the responsibility of the person who is the fiduciary with respect to QDROs. That may be you, the plan administrator, or someone else. That person must act based on the terms of the order. If that person’s interpretation is not what the parties expected, the outcome (which might result in a revised interpretation or revised/new order) is determined through the plan’s claims procedures.

Maybe after considering the prohibited transaction issues.

While the QDRO fiduciary's lawyer appears particularly dispicable, union plans in particular are really terrible at complying with the law, out of either incompetence or misplaced knee-jerk support of the union member. However, I doubt that there is anything you can do formally because you did such a good job of lawyering that you avoided an outcome that was a breach of fiduicary duty. Had you been unsuccessful at persuasion and forced to pursue the claims procedure, or other path, to court, you could have made the fiduciary suffer fees and costs, as you pointed out. With respect to the lawyer, since he or she was dealing with another lawyer (you), I doubt that any sanction is available under the applicable code of legal ethics. The lawyer was zealously advocating for the (misguided) client. And that lawyer can say to you, with impunity, whatever the lawyer chooses. Your success is your worst enemy with respect to your desire for discipline. And the DOL doesn't care becuase the DOL doesn't understand QDROs (but I am glad you could put the DOL's marginal materials to good use), but more importantly the DOL is too busy dealing with achieved breach of fiduciary duty to trifle with a failed attempt. So you are left with informal measures, such as public shaming, which are inadequate if only for lack of a forum that has a relevant audience. I am not aware of a website that has a ratings or a bashing platform that would reach a QDRO audience. I note that you did not name names here. And what would you say? XYZ Lawyer is either an ignoramus or a knave, but can ultimately be defeated by a persistent super competent professional? Or maybe you could punch him/her out in a back alley, which is what I felt like doing a lot before I switched career paths and left litigation, much to my integrity, inner peace, and possible longevity (as yet undetermined). Too much skullduggery is tolerated, or at leat not punished, under this "zealous advocacy" BS. My dig at the DOL was not properly formulated in context or properly focused, but I am going to leave it anyway, because one should never pass up an opportunity to point out the DOL's shortcomings with respect to QDROs.

Does this put you at ease relating to your part in it? https://www.irs.gov/retirement-plans/ira-based-plans It dos not help much with the practical design, execution, maintenance, and disclosure issues. It is also only the IRS position. Other ERISA issues are implicated depending on the details.