QDROphile

We have all been speculating about what the plan has received relating to the divorce, and have been discussing the effects contingent on timing. If the plan has received nothing and does not have procedures that get into the DOL's bizzaro world of notice about an intended QDRO, then a claim by the surviving spouse can be processed and paid, leaving nothing for a late-delivered domestic relations order to operate on and legal malpractice as a potential source of consolation to the former spouse. But what happens when an order appears during the process and before the actual 100 percent distribution? And despite my confidence about the law and contempt for the DOL, it is uncomfortable for the fiduciary to stand by with information about a legitimate claim missing the boat as the fiduciary decides how fast to proceed with distribution. The practical, but controversial, solution based on a desire for the right outcome, is for the fiduciary to say, "send me the divorce decree, now" (improperly stepping into the role of legal adviser to the former spouse). ERISA is firmly based in equity, after all. Or, if you are a no-nonsense fiduciary, you have no sympathy for those who sit on their rights, and Equity will agree, at least at some point. And I would not gainsay.

I agree to disagree. Also, please do not take personally my terse and irreverent comments about blithely invoking interpleader. I was making a the comment based on observation of comments on Benefitslink about interpleader over years, not on your particular comment (although your comment was a trigger to riff about interpleader). As your response recounted, your reference was based on consideration, whether or not we agree on the outcome of consideration and the speculation underlying it. I will make one further comment about QDROs, triggered by this situation, but not in furtherance of a discussion about interpleader. The statute requires action by a plan if the plan receives a domestic relations order.* While most divorce decrees do not try to be a QDRO, they are domestic relations orders. If a plan receives a domestic relations order, it must, within a reasonable time, determine whether or not the order is qualified. If the order is not qualified, the proponent has a reasonable time to cure qualification defects. Implicit in the requirement is that distributions that might compromise the rights under the ultimate QDRO (assuming defects are cured) should be suspended pending the resolution of the proposed QDRO. Also, as a concept, death of the participant pending resolution of the QDRO does not prevent qualification and implementation, although the facts can make a mess of this concept, especially under DB plans. In short, it can be a valid and intelligent move to submit a non-qualifying domestic relations order to preserve an alternate payee's rights while efforts are being made to come up with a QDRO (very often because the lawyers are derelict in getting to the technical QDRO part of the divorce). All within a reasonable time and clearly holding other would-be distributees in full or partial abeyance without putting the fiduciary in a bind because of the delay, assuming reasonable diligence by the fiduciary in the proceedings. *Plan terms or terms of written QDRO procedures can require the fiduciary to take action before the receipt of a domestic relations order upon some notice about an intended QDRO, but such provisions are ill-advised. The Department of Labor incorrectly asserts that a plan must always take some action when notified about an intended QDRO, another demonstration of the DOL's ineptitude in this area of law.

Would your answer change if the divorce decree were submitted to the plan today? Are you assuming that a claim for benefits has been filed by one, or both, of the claimants? I think the fiduciary has to at least conform to express statutory procedural requirements. In the process, the complexity may resolve, which is one of the things required procedures are intended to accomplish. And an informed competent practical fiduciary will guide the process to an efficient resolution. And which court is going going to be happy about receiving the case before the fiduciary has completed the statutory procedures*, and do a better of unraveling the complexities of a strange plan, a strange federal statute, and matters that are currently before a state domestic relations court? And "benefit rights to spouses and ex-spouses have matured but we are not sure what they are" is the answer to the widow who wants benefits now and why the statutory claims procedures have reasonable times built in for adjudicating claims. *Courts really do not want to hear disputes, especially complex ones that involve overlap of state and federal laws and jurisdiction, so we have doctrines like ripeness, exhaustion, and abstention that will have to be addressed in the filing of an interpleader.

Correct, but those instances should be rare. The fiduciary cannot just claim, "Whoops, I've got two claims, each on its face with some merit, I will invoke interpleader." The fiduciary has to consider the claims, and may have to investigate directly or indirectly, and make some factual and legal determinations. For example, in the circumstances described in this thread, the fiduciary may have to investigate the implied claim that the former spouse had been awarded an interest under the plan before death, determine whether or not the order awarding that interest is a QDRO, and apply the correct law regarding post-death qualification of domestic relations orders (unassisted by the Department of Labor in its irresponsible failure to comply with the Congressional mandate to adopt competent regulations concerning post-death QDROs, further demonstrating that the DOL doe not understand either the law or the practicalities of QDROs) as part of evaluating the merits of the claims. If the fiduciary does its job of evaluating the two claims, it is very likely that there will NOT be an "inability of the fiduciary to decide which claim takes precedence." The glib advice to use interpleader is too easily given by those who know the basics if what it is, but do not understand how it works in practice, especially when ERISA fiduciary duty is involved. The ERISA fiduciary is not merely a bag holder who has a good faith desire to see that the better claimant gets the goods.

Golfing’s “What if” is exactly the optimal path, and if I were the Plan Administrator, I would even suggest as much in order to make life easier for the plan. It is really the job of the former spouse’s lawyer to do this, but most domestic relations lawyers do not understand procedural niceties for QDROs even if they can manage to draft a qualifying order that achieves the intent of the parties.

And that's the truth. Pfffthp!

The appropriate fiduciary has a duty to make various determinations in this matter and cannot simply punt to interpleader.

Depends on what the pre-death divorce decree (or its equivalent under applicable state law) says about the plan benefits. The decree is a DRO and does not have to be qualified, but it must say something about awarding an interest under the plan to the former spouse. Qualification defects can be cured by a post-death order. The outcome also depends on when the plan receives a DRO and what the QDRO procedures say about what is required before the plan takes any extraordinary action relative to receipt of a DRO.

I agree with jpod.

How do A and B constitute a controlled group? How does "someone purchased A" affect the factors that determine the relationship, or not?

It used to be that one could hire Judy Diamond to look up DOL filings. But some people believe that everything should be free.

Treas. Reg. section 401(a)(9)-8, Q&A-6

Most likely the only option is to provide for the split of the stream of annuity payments. There are several issues involved in doing that, depending on what the plan will tolerate, but there is a conventional way to do it. Since the annuity payment schedule is set, and ends at his death, the division is constrained by his life (and not his life expectancy.

This is part of your divorce property division. If you had a lawyer assisting you, seek advice about this piece. Seek advice anyway. Retirement benefits are often one of a households biggest assets and division of them can be confusing.

The proposed terms of the order will be presented to the domestic relations court. You can consent to its adoption (sign) or you can object and the court will decide on the terms that it approves. Ultimately it is the court's order.

And if it is a multiple employer plan, do not overlook securities law compliance.

Are you an adviser or a scrivener?

How about the idea is confused and misguided thinking? If the employer does not want to make the benefits of loans available, then don't rather than undercut the ability of the individual participants to make their own best plans with the resources they have available to them. We might all agree that plan loans are often not the best alternative for an individual, all things considered, but I cannot accept that imposition of the employer's presumptions produces the best outcome for every participant. In fact, I would argue that in many, if not most, cases, continuing elective deferrals rather than prepaying plan loans is a better financial move. Even if the objective arguments are not persuasive, it is just offensive to have the employer presume to manage someone else's personal business at such a detailed level. Is the plan designed to require the participants to direct investment of their accounts? If so, how the employer reconcile that? We all know that employees generally do not make optimal investment decisions.

It all depends on the terms of the order, but it is extremely unlikely that anything about her financial situation or events that occur after start of pension benefit payments (other than her death or perhaps the death of your husband) would affect her benefit or the payments she is receiving. The QDRO is a property division. She got her interest in the pension at the time of divorce. Any post-divorce developments, such as her remarriage or you husband's remarriage or post-divorce financial fortunes, should not change what she got as a property settlement in the divorce.

The lawyer can pound sand. The plan does what it does. This will be an opportunity to see if the lawyer can figure out how to file a claim for benefits.

The loan can be secured by an assignment of pay at the time of loan initiation. The security arrangement operates apart from the statutes concerning payroll deduction. Most plans are either unaware or unwilling to take the administrative steps to effect the arrangement. That leaves them to deal with the payroll deduction statutes. Those statutes do not uniformly allow employees unfettered ability to cancel payroll deduction - they vary.

And I suppose that the new employer is not really interested in finding out what would be necessary to make it work. It does not involve adopting a loan program.

Somebody should ask the new employer to think about delivery of the message to the new employees that they are so unimportant that the new employer was unwilling to make a reasonable accommodation to avoid financial hardship for them.

What is the impediment to identifying them, and only them, for one of the solutions you specified? HCEs? The program for the new employer would simply be a payment program, which would not be very burdensome.

Can a final Form 5500 be filed if the plan has not been terminated?