QDROphile

My limited comment on the 0% is that the amendment would be stupid and inflammatory. Almost a guarantee of a challenge. If the plan is amended, it should be to eliminate the reference to interest at all, not to change the percentage to zero. No comment on how to implement.

How about the ERISA and tax provsions that require the plan to be administered in accordance with its terms?

One wonders if a government unit may have a retirement plan if it does not have statutory authority for it.

If the fiduciary with responsibility for QDROs has interpreted the order and arrived at the number, then it is a lovely idea to get the participant and alternate payee to confirm that they agree with the interpretation. Agreement can be obtained expressly or implicitly. Just like in school, it is probably best for the presentation to explain or show how the fiduciary arrived at the result. All the better if the terms of the order are ambiguous or otherwise difficult. If they disagree, then the fiduciary can disqualify, even if the fiduciary has previously qualified, based on latent ambiguity or other issues with the interpretation. If both parties don't agree with an interpretation, one or both are wrong, and the fiduciary may be wrong, so it is reasonable to disqualify so they can go back and fix it. Answering your question is a bit difficult without detail, but that is the nature of the message boards. ALL determinations of qualification should be conditioned on the interpretation of the fiduciary, and the fiduciary should state interpretations when appropriate. If there is a quarrel with the interpretation, then the fiduciary can disqualify and let them work it out. I will spare you my usual comments about how the company should have no part in fiduciary functions. Oops. But what does the lawyer involved in the first place say to all of this now?

The participant and alternate payee cannot simply agree to a modification. You can get them to confirm that the number arrived at through the calculation is correct or within their expectations and intent, if the calculation is ambiguous or reasonably disputable. If they have any disagreement, that won't help. Someone has the authority to interpret and determine qualification. That person is probably not the TPA, because interpretation and determination are fiduciary functions. How strange is it? Why can't the fiduciary tell the TPA the numbers, whether or not the TPA agrees with the interpretation? If the TPA is a fiduciary and has the authority, then the TPA/fiduciary should be controlling the communications and can do what it wants and will have responsibility for what it does.

If you want specific answers that don't require presumed knowledge, you have to ask a specific answerable question. The first question for you, and almost always the first question in any analyis, is what does the plan document say can be reimbursed? Unless you post that information, readers can only guess. Actuarysmith made a reasonable guess and gave an answer that is responsive to the typical issue about eligibility.

Ask the rocket scientist who drafted the plan document. Most children are taught to clean up their own messes... .

Does the plan say that it accepts property other than cash as loan payments? Very unconventional and not very smart if it does.

I agree with Mike Preston and mbozek. Unless the participant's account does not have enough money, you can do (and must do) what the order says. The order simply divides the account between the AP and the participant and specifies a minimum for the AP. The order can insulate the AP from loss to the extent of the participant's account total balance. In the notice of determination, you should explain and illustrate how the AP's interest is calculated. I assume that you don't segregate until the valuation date unless you have a very sophisticated system for apportionment and true up of accounts. Perhaps that is what is gnawing at you. You can require the order to work within the plan's valuation dates and system. In that sense, I can agree with MWeddell if the order insists on some timing of the division that the plan (e.g. a particular segregation date that is not a valuation date) cannot accommodate, but I would try to interpret the order in a way to fit the system and then rely on the explantion. If they don't like your result, they can amend the order. Your written QDRO procedures should spell out any restrictions on timing of valuation and division of account. If you are simply looking at a draft rather than an order, you can be tougher on them and insist that the order fit better with the timing of the plan's valuation and accounting system.

CRC02 is revising the document. The question was could it be written that way. There are multiple definitions of "rationalizing." As a lawyer you are most involved with one of them ;-).

Applying the J&S requirements to all accounts is a common approach to rationalizing the requirements that would otherwise apply only to the MPP accounts.

If the plan is not set up to have these sorts of calculations performed for any other reason, I question whether the plan is obligated to go to such an effort. If not, the order is not qualified. I think it is acceptable to make records available to the participant and alternate payee and let them figure it out and give a number to the plan. A lot depends on the actual facts and circumstances.

If the ESOP allows alternate payees to receive distributions on demand, does it comply with the diversification requirements because the alternate payee can take a distribution, which is an acceptable method of diversification? Consider that the alternate payee has a right to distributions at the participant's age 50. Does that mean the ESOP is OK as to the alternate payee unless the QDRO forgot to include the early retirement age distribution rights? Another way to look at it would be to treat the AP's interest interest as a subaccount of the participant's account. Whatever the participant does, the same thing happens pro rata in the subaccount. The law does not give an alternate payee separate right to chose investments. ERISA says an AP is a beneficiary. You are not doing anything else for the ESOP's other beneficiaries. The tax code doesn't say. Make sure you think about the effect on the participant's aco**** and rights, whatever you do for the altenate payee. Depending on your choice, you may need to coordinate Nothing precludes approaching it your way. I think most persons would start their thinking along those lines. Be reasonable, be true, put the key provisions in the plan document and get a determination letter.

Your main problem for comparison is scope. There are many elements of QDRO administration, and determination of qualification of a domestic relations order is a fiduciary function. When you get information about cost, you have to be sure you know what elements are covered by the cost, and especially if one of the elements is the fiduciary responsibility. Also, you know you get distortion in charges when you are dealing with bundled services and products. I have heard figures of $500 per order associated with both Fidelity and Vanguard, but I don't know what the fee purported to cover.

JanetM Assuming a providently drafted QDRO, what are you going to do when an employee who is an alternate payee demands a distribution when the former spouse reaches age 50? What do you do about a demand for payment when the former spouse terminates employment and the alternate payee remains employed?

RTK makes a good point. A plan can be designed to allow a form of benefit to be reformed under a QDRO. For example, a single life annuity could be reformed to provide two single life annuities, one for the participant and one for the alternate payee. A literal reading of IRC section 414(p)(1)(A)(i) does not include taking away any interest of an alternate payee. It provides only for recognizing or creating or assigning an interest for the alternate payee. A literal reader would conclude that an order that tried to take away a survivor annuity interest fails to be a QDRO. Are plan provisions effective if they allow allow a "QDRO" to reform a J&S annuity to provide a single life annuity? A determination letter does not cover whether or not a domestic relations order is qualified.

There are more cases after the Hopkins case. Most of them cite the Hopkins case, even when they disagree.

That provision, despite wrongly decided court cases, allows a former spouse to get a QDRO that taps into the survivor annuity after the participant has remarried and started benefits. The QDRO could provide something like "the alternate payee shall receive $100 per month for as long as benefits are paid to the participant or survivor." A QDRO can make the survivor benefit go to an alternate payee. If you simply try to divest the survivor of the benefit, where does it go? It cannot go to the participant. If the survivor benefit can't go to someone else, why bother? The participant may act out of spite, but the plan should not. If the benefit can't go somewhere that is legitimate and supported by authority, I would be disinclined to say that the former spouse can be divested at this point. Those wrong QDRO decisions say the survivor cannot be divested, even by a domestic relations order. See Hopkins v. AT&T Global, 105 F3d 153 (4th Cir. 1997).

If you intend or expect every director and officer of the company to be personally liable for every fiduciary act, then the company can be the fiduciary. It is not a matter of the employer having recourse against the individuals, it is that the individuals who have corporate responsibility will all be exposed personally. ERISA will pierce the corporate veil to find individual fiduciaries. It is better to identify those persons who will in fact have fiduciary responsibility, make them named fiduciaries (via a committee or otherwise), and protect those who will not in fact have fiduciary fuctions by not lumping them in with a group that has fiduciary functions.

If the plan is registered under federal securities law, the prospectus is required to state trailing performance of each fund. I am not familiar with a registered plan that unitizes company stock. If the plan is complying with the regulations under section 404© of ERISA, some document available from a plan fiduciary upon request will provide investment return information, probably the mutual fund prospectus and periodic fund statements and reports (if you have retail mutual funds). Derivative materials prepared by or for the plan may also state returns. If the plan is not required to be registered and is not participant directed, the plan is not required to report returns on particular investments, but the plan investment fiduciaries will have investment return information.

Fortunately, a few judges have seen it our way and dismissed a few ill-considered lawsuits. No attorneys fees yet.

"Without merit" is a bit extreme, even for a lively discussion of the issue. I think the circumstances of the negotiations, the compensation package and the outcome from year to year is important. There is an issue and need for advice from someone who understands the issue. Certain approaches are not possible and how you document the arrangements can make a big difference.

An employer should not be authorizing an employee to be acting on its behalf becuase the employer should have nothing to do with distributions. I know about the unfortunate decision in Varity and the confusion it has spawned, but employers are not necessarily fiduciaries and they should not design their plans to make themselves fiduciaries

The plan sponsor should not be authorizing distributions. That is a fiduciary function and the sponsor should not be a fiduciary.

See Treas. Reg. section 1.401(k)-1(g)(11)