QDROphile

This is a piece of a corporate law question that must be evaluated in the full context of all of the ownership, agency, and operations relationships.

All ERISA plans have written procedures for filing a claim for benefits. That is the formal mechanism for determining and receiving your benefits. A copy of the claims procedures are available to you without charge. However, I agree with C.B. Zeller that your first stop is an informal inquiry to the person at the employer who is responsible for plan matters.

"Unfortunately, Rev. Rul. 2004-21 begs the question to come to the result:" Holy Shoot (check the George Carlin translation)! Did someone really use "begs the question" correctly? I am delighted, encouraged, gratified, amazed, and reassured about humanity. I am too lazy to check Rev. Rul. 2004-21 to confirm, but it appears that Dalai Pookah nailed it, or at least put the phrase in a context that looks correct. No comment on substance, but the rhetoric is soooo refreshing.

Clarification based on Calavera’s correct observation: A post-QDRO event, including death of the participant, almost never causes any part of the benefit awarded to the alternate payee under the QDRO to become available for the benefit of someone else, such as the new spouse. A new spouse may have a benefit in her/his own right under the plan. The plan should always be approached after the death of a participant to determined what benefits are payable to a potentially interested person, such a spouse. Don’t expect to be capturing anything awarded to the former spouse under the QDRO.

If a QDRO was accepted by the plan, it will be executed in accordance with its terms. Some payments may have already been completed. Some terms of the QDRO may be triggered by the participant's death, but the benefit to the former spouse is set by the QDRO and it would be almost unheard of if a later event, such as death of the participant, would give rise to anything of benefit to a new spouse.

What similar situation? A plan administrator that incorrectly applies the QDRO rules? It happens all the time. If your circumstances are somewhere near correctly described, they are out of the ordinary. “Spun off” is a term of art that is suspicious in your description.

Wow. Your second paragraph contains the answer to your first question. So does the Summary Plan Description, if the SPD is properly drafted. The short, short answer to #1 is "no" and the fuller explanation is in the SPD.

If the plan is a private employer plan and has not received a domestic relations order (or sometimes some kind of notice of a pending domestic relations order), the plan should proceed as usual with start of benefits. However, you personally might be violating a court order or procedure by starting your benefits pending resolution in the court of division of your benefit. Public employers sometimes follow different rules.

Is the investment real estate or a limited partnership that invests in real estate? Either way the lender cannot get a security interest in the investment that the lender can look to (instead of the borrower) to cover the debt in event of default. The lender can only get a security interest in part of the investment (if at all) and would not be able to foreclose to satisfy the obligation. That is not classic nonrecourse debt. A tested model is a plan buys a building with nonrecourse debt, and the lender has a mortgage on the building. In the event of default, the lender gets the building in foreclosure (any liquidation surplus goes to the plan as legal owner). No comment on UBIT.

Outside of real estate, where the financed property serves as the security, a non recourse loan is unusual, and an unsecured non recourse loan is so strange that is raises the question about ancillary benefit (intangible though it may be) that may violate the prohibited transaction rules. It depends on how deep you want to go and how seriously you believe the DOL position and how far the DOL would really go. A lot of people find it hard to believe that the DOL would take it as far as the DOL says. How do you evaluate the commercial reasonableness (e.g. interest rate) of the strange loan? It would be worse with a family member than friend.

Do you have a real world proposal, or are you writing a treatise? It is easier to evaluate a concrete transaction.

Unless the plan has screwed up and adopted provisions that the law does not require, the plan does not have to do anything without a domestic relations order, and should not do anything, including “put a hold” on the account, which easily means no messing with investment instructions and, more difficult, following instructions about distributions.

To supplement Larry Starr, if the divorce is getting cold and nothing was expressly done regarding the retirement benefit, state law and the divorce documents are the most important factors. It was a mistake not to have expressly dealt with the retirement benefit, even if the ex spouse was not supposed to get any of yours.

If you want to play according to Hoyle, you would submit a claim under the plan’s claims procedures. The procedures are either contained in the plan’s Summary Plan Description (SPD) or summarized in the SPD with a referral to a separate document. I do not know what you mean by a “Fidelity qdro” and my suggestion is based on the QDRO actually saying what you purport to be the correct assignment to your former spouse. If the QDRO does not say what you think it should, then you need to take a different approach for relief.

But your question presupposes that "lower management" has 409A compensation and my point is they should not have the problem in the first place because they should not have 409A compensation. l am just being unsympathetic. If these people are SOL, they never should have been in luck that they are now out of. Not their fault.

The "B" is "benign" but I think that is soft-pedaling it even though technically it distinguishes the condition from more scary alternatives such as cancer. Be content (and continent) in your ignorance.

If you really want to FEEL old, try BPH.

That may not be a bad thing. It was sometimes tricky dealing with participants (professional partnership members) to make them understand their Keoghs were not somehow magically excepted from the 401(k) rules.

Lower and middle management HCEs = Select group?

Unless a plan's written QDRO procedures provide otherwise (which many do*, although they should not unless they like trouble), the plan conducts business as usual unless the plan (including an agent of the plan) receives a domestic relations order -- not hears about one, smells one, or infers one. If a terminated participant is entitled to a distribution, then a distribution should be processed in accordance with usual plan procedures. If the Standing Order has been delivered to the plan, then the plan should follow its procedures for processing a domestic relations order (we know it does not meet the requirements). This is the same approach as can be taken with the travesty California Joinder Orders. The plan has a reasonable time to determine whether or not the standing Order is qualified, and will not make a distribution pending its decision. Who knows what a reasonable time is, exactly? With any luck, a "real" domestic relations order that want to be a QDRO will be received within a reasonable time and then things are back to normal. If not, then the QDRO fiduciary (probably PA) will have to take appropriate action on the Standing Order, which will involve allowing a reasonable time for that action to be appealed by the aggrieved person and no distribution will be made pending the decision on appeal. The circumstances are complicated because a plan fiduciary is a party to the divorce and presumably has knowledge or receipt of the Standing Order?. Is that receipt by the plan? I would prefer not to argue that it is not receipt by the plan. Forget about the rollover, analytically. Rollover is merely something that can happen to certain distributions. It is only a distraction in this matter. I agree with Larry Starr that this should be overseen by the plan administrator, even if the plan administrator is clueless and reliant on the TPA for everything (which is why TPAs get out of their lane too often). Be careful who you choose as advisers. *Misguided by incorrect informal Department of Labor guidance about the law.

There is a lot going on that I would inquire about if presented with this matter and nothing is revealed about the terms of engagement of the TPA, but I will accept your conclusions, overlook the omissions, and limit my response to your very focused question with a very focused observation: Forwarding a distribution request to the Plan Administrator/Trustee (presumably one person wearing two fiduciary hats, but that detail is uncertain) seems like a ministerial act. The refusal to carry out a purely ministerial act seems to be based on the exercise of of interpretation and judgment. Exercise of discretion (choosing to act or not act, or how to act) and judgment are hallmarks of a fiduciary. One can be a fiduciary by acting like a fiduciary, whether or not one is formally designated as a fiduciary. Nothing further should be inferred from the observation, especially not anything related to consequences or anything related to what the expected or appropriate action by the Plan Administrator/Trustee would be.

My first thought response to the post was much the same as Larry Starr's, and I agree with that response. But my second thought is that you (through your lawyer) should be asking the PLAN what you should be asking the judge. Post-death QDROs relating to defined benefit plans are tricky because of IRC sections 414(p)(3) (A) and (B) and the potential for something like adverse selection (although the problem is not exactly adverse selection. The issues are complicated and the guidance issued by the Department of Labor at the instruction of Congress (because matters of post-death QDROs were so misunderstood and sometimes difficult) WAS ABSOLUTELY USELESS. SHAME, SHAME SHAME ON THE DOL . But what do you expect of an agency that doe not understand the law it is supposed to administer? The DOL QDRO Book has at least two material errors, so maybe useless guidance on post-death QDROS is an improvement. Back to the point. Because the DOL failed to do its job, defined benefit pension plans were left with unanswered questions about how to deal with a post-death domestic relations order. Well advised ones, of which there are very few when it comes to QDROs, created their own rules that try to be fair about allowing post-death QDROs, but also protecting plan assets against "adverse selection." Such rules should be set forth in the written QDRO procedures that ERISA requires of plans. So check with the plan to see if it has any guidance or limits relating to post-death QDROs to inform you (your lawyer) about what to ask for in anticipation of submitting the domestic relations order to the plan and setting expectations about whether you will have more or less trouble with the plan in the determination of qualification of the order.

A significant part of answering your questions depends on the actual specific terms of your divorce settlement/judgment and on state (Pennsylvania) domestic relations law rather than federal “QDRO” law. Also, a few statements are confusing, such as you are retired but cannot start your pension. Your lawyer’s statement does sound unexpected but the lawyer should explain it to you - and that explanation should refer to the terms in your original divorce papers. The participants on this board cannot affirm or criticize without a complete review of documents and history. And then there is that pesky state law that few or none of us are familiar with.

What was provided to the plan (via Fidelity or other agent) in connection with the divorce? I suspect that (1) unnecessary and incompetent communications were directed to the plan, and (2) you will have problems with Fidelity because Fidelity has little proper regard for the law. You may have to deal with the plan administrator to get around Fidelity. Fidelity might be the administrator for purposes of QDROs, or perhaps the actual plan administrator. I assume, skeptically, that that I correctly understand provided description of the property division in the divorce to mean that no interest in any retirement benefit was intended to be awarded to the former spouse and nothing was expressly awarded in any of the divorce documents.

As Larry Starr advised ... .