QDROphile

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.

Before I go on a socio-political economic tear, does the emplyee have the option to receive the "contribution" in cash rther than deposit to IRA?

Do you really mean "adding a Roth IRA as a plan option" or do you mean increasing the compensation of select employees and depositing the increment (or some portion of it) into an individual Roth IRA of each select employee?

As far as your phrase of concern ("The Participant shall not be required to name the AP as his surviving spouse before his annuity commencement date.") goes, it looks to me like incompetent drafting. I think the phrase has no place in a domestice relations order. It demonstrates a lack of undrestanding of DB plan benefits. It may be found in models and model language because of the recurring failure of domestic relations lawyers to deal with death beneifits properly, but it is a very bad place holder in lieu of not addressing the death benefit issue at all, which omission I believe would be malpractice. This points out that somebody needs a competent ERISA adviser to make sure that the parties understand the issue and the the drafting lawyer states the intended outcome properly in the order in a way that the plan can understnad and implement the informed intent. I think the plan's response was is a suggestion that the language was incompetent, and it got it's appropriate attention. Now that is has the attention of the parties, y'all need to reach an informed understanding and decide on the division of benefits that has the intended and fully understood outcomes. Your penultimate paragraph shows you are on the right track toward understanding. I hope you can get advice that gives everyone a full understanding of the issue.

Your description is not completely clear, so pardon incorrect inferences. Taking the perspective of the AP, the intent of the division of the pension benefit was to provide to the AP some interest in the death benefit (an assumption). That would not be surprising -- the death benefit is an important element of the entire benefit. For some reason (bad drafting, bad interpretation) the plan read the order as not providing an interest in the death benefit and was competent in its procedures to make that interpretation clear (probably becuase the plan suspected that the omission was not intended). You like that interpretation, but it is not what was intended in the divorce settlement. Just as the plan said, if the plan got it wrong, then the order needs to be corrected by submitting an amended or superseding order. That is what the AP is working on. It is all about implementing properly what was intended by the state court order, not how the plan interpreted the words of the order. You can contest the AP's position about what what was intended/agreed in the divorce proceeding, but that contest occurs in state cocurt and the interpretation by the plan of the original order is irrelevant (my opinion). The AP's rights are what the state court awarded.

Because you appear to be a fiduciary in some capacity (maybe not the one with direct responsibility, but one with monitoring responsibility) you have a duty to follow ESOP Guy's advice. You have taken the first steps in discharging that duty -- informing yourself about what is going on as you step into your role, and then asking questions about what you do not understand or appears odd to you. The appraiser may not know or may misunderstand how the company is using the appraisal for non-ESOP transactions, e.g. believing that the valuation number is post-sale to to the company by departing employees. The questions of who "owns" the appraisal and permitted use of the appraisal is important to everyone, including the appraiser.

I would worry more if the place holder were 666.

Clarification: You MAY need to file a claim for benefits. The plan administrator may correct any improper reduction in your benefit informally based on having the mistake pointed out. Then it is the plan administrator's separate concern about the overpayment.

Why do you think you need recourse? First check with the plan administrator about your benefit. If it is not what it should be, then you need to file a claim for benefits. You should be able to do that without starting payment. If your benefit is improperly reduced because of the mistaken calculation of the AP benefit, then you will need to proceed through the claims procedures to get a correction. If your benefit was not adversely affected, overpayment to your ex is not your concern.

I thnk the point of the discussion is that the provider will only take payment in the form of a charge to the trust assets. To the extent that certain fees and expenses are eligible for employer payment or reimbursement (not all are), that can be handled by separate billing/payment, not charged to trust assets, subject to compliance with the applicable PTE (depending on the nature and timing of the reinbusrement arrangements).