QDROphile

Which is why "Estate" is almost never a good designated beneficiary for either qualified plans or arrangements such as IRAs.

I've been told many times from many sources that domestic relations judges are very much disinclined to revisit and modify final orders absent extraordinary circumstances, such as fraud in the original proceeding. The argument for revisiting because of "mistake" quickly loses effect as time passes and circumstances change.

You seem to have a good grip on the matter. You are far too generous to the Department, of Labor in its abject failure to provide meaningful post-death QDRO regulations, as it was directed to do. The DoL gets a C- in QDRO class generally. As described, the crux seems to be the intent of the original decree. If that decree is “corrected” to reflect original intent and some sort of clerical mistake in naming the plan, I think the QDRO fiduciary could be more demanding of the state court action in persuading the plan that, in fact, it is a correction of a mistake at the time, and not an opportunistic grab at benefits that were not on the table in the first place. Normally, the fiduciary does not question the domestic relations proceeding, but this is not normal. Under normal circumstances, the domestic relations proceeding is adversarial. If revisiting the original divorce decree is adversarial, perhaps because the subsequent spouse is a party to the action to argue against naming a new plan, the plan fiduciary can be more accepting of the outcome.

Consider the requirement to have an expectation of repayment before issuing the loan. When payment is by payroll deduction, there is a high level of confidence. If the loan request is on the eve of layoff, maybe not so much.

May I suggest “automatic payment arrangement satisfactory to the Administrator”?

I don't know what this means: "Issue with payroll caused this person to defer 10% Roth instead." Do you have a failure to comply with plan terms if regular deferrals were elected and instead Roth is credited? Your solution might make the participant happy enough, economically, if you did a full gross up (calculate it before you suggests it), but what about compliance?

Simple. And inefficient. Does the plan charge for review of domestic relations orders?

Generally, I think interpleaders are a cop-out on the part of fiduciaries. They should make decisions as best as the can, and the unhappy parties can appeal and give the benefit of their knowledge in the process. Ultimately the court is there on either path.

I am in David Rigby's camp. I would qualify the order subject to the interpretation that the assignment is $125,000 as of the assignment date, and then adjusted, but any contributions after the assignment date are disregarded. This allows the affected parties to assess the mistake. If they decide it is the best/intended outcome with respect to the plan benefits, it minimizes the fallout for everyone. If one or both are dissatisfied when apprised of the mistake, then they appeal the interpretation to the administrator and get a ruling that the order is not qualified because the condition for qualification (correct interpretation of the language) fails. A checklist is fine, and a good approach to QDRO administration, but knowledge plus good judgment serve fiduciaries better.

The bank is probably not the fiduciary responsible for QDRO administration. What is your role in all this?

Nice succinct summary, Mojo.

As you have described the situation (I do not trust the description to be accurate or complete. Among other things, I assume that the “employer” is a private employer and not church related.), the core problem is that the plan suffers from a rectal cranial inversion. The plan has no business digging into the divorce. A death certificate would have sufficed to discharge its duty to question the change in spouse designation. It was a mistake to provide anything but the death certificate, but that mistake should not have led to the current situation. My earlier comment stands. The fiduciary is breaching its fiduciary duty by undue delay in processing the distribution. Unfortunately, the fiduciary is probably not amenable to informal education about the error of its ways, and will have to be forced to let go. That path is through the formal claims procedure to make the fiduciary face and explain its actions and position. An appeal of the initial decision may be necessary, and then possibly taking the matter to federal court. One of the good cards that the participant holds is that the federal court has the ability to award costs and attorneys fees against the fiduciary. Perhaps if that threat is brought up early enough, and it inspires the fiduciary to get its own good counsel, the process can be truncated. Your question about a lawyer is timely. It would be well to have competent counsel start the written claim. That might cause the fiduciary to engage counsel that will then disabuse the fiduciary of its current position. What kind of lawyer? One who knows what they are doing. One who has a focus on ERISA practice. That eliminates most lawyers who have a divorce practice.

I really wish I could use my preferred, profoundly crude, language (to be passed on to the appropriate plan fiduciary) in this response. I will try to restrain myself. The failure of the would-be alternate payee to submit a timely domestic relations order that, maybe, would meet the requirements to be a qualified domestic relations order is simply tough luck for the would-be alternate payee. If the fiduciary responsible for QDROs is taking a position about the former spouse based on submission of the divorce decree to the plan long ago (the divorce decree IS a domestic relations order), then the fiduciary has breached its fiduciary duty to process the domestic relations order and determine whether or not it is qualified. If there has been no recent notice of intent to submit a domestic relations order that could qualify, or recent submission of a domestic relations order, the plan has no basis for any delay in beginning distributions to the participant. Any delay in beginning distributions is another breach of fiduciary duty. If it were me, my next communication to the plan would be a threat. However, the “by the book” approach would be to submit a formal claim for benefits, which will require the plan to issue a formal response concerning its position on whether or not to start benefits to the participant, and why. The plan is required to have written claims procedures. Proceed from there.

The plan sponsor/employer has nothing to do with QDRO procedures. QDRO procedures are a matter of plan administration, to be adopted by the plan administrator, or if there is a separate fiduciary for QDRO administration, then that administrator. Don’t get sloppy about the distinction just because most plan sponsors inappropriately* name the employer as the plan administrator. As far as adoption of the written QDRO procedures goes, appropriate adoption action and memorialization is determined by the form of organization of the administrator (unless the plan itself or other adopted procedures under the plan specifies how adoption is to be carried out). If the administrator is a corporation, then the adoption should follow the corporate procedures and policies for adoption with respect to similar matters. That gets us into matters relating to corporate and agency law, including delegation of authority, etc., which is beyond the scope of this response. —OR— it is possible that the sponsor/settlor adopted an entire package of plan documents in one action (of course with full knowledge and mention of everything that was being adopted - not) and the written QDRO procedures were included in the package. *Choice of who to designate as a plan administrator is a separate matter in which I am a righteous outlier, if you review the discussions on the subject in Benefitslink. It is fine for a sole proprietorship to name the employer as plan administrator, and that’s about it.

This response is based on some inferences and is not advice. I am uncertain what is meant by your award of “an annuity at fifty percent.” You report that you were awarded a portion of your former spouse’s pension as a separate interest. With respect to the remaining portion of the participant’s interest that you were not awarded, how can you be a surviving spouse? The reason you were awarded your separate interest is because you got a divorce. You are no longer a spouse of the participant, and therefore cannot be a surviving spouse with respect to what is left of the participant’s interest. The plan knows you are no longer a spouse because of the QDRO. It does not matter that the designation of you as a spouse was not updated. The plan has sufficient records to determine your status — not a spouse. The plan is not going to pay a surviving spouse benefit when there is no surviving spouse. The plan will enjoy an actuarial benefit from the early death of the unmarried participant. If the plan has an option for a survivor annuity for a non-spouse, and you were designated as recipient of that survivor benefit, you might have something to go on if the designation of survivor were not updated after the divorce. I am guessing that most pension plans provide survivor benefits only for spouses, and this is one.

You didn’t ask, but if this is a 401(k) plan and Company A and Company B are not under common control or properly treated as a single employer, are they related in a way that allows the plan to be exempt from registration under applicable securities laws?

First, is the plan subject to ERISA? Mention of a probation officer raises the question about the type of plan. Could it be a government plan? It makes a big difference. If it is an ERISA plan, I would start with a claim for benefits by the widow in order to make the plan state its position. Also, a claim for benefits is rather simple and cheap relative to other courses of action, which may ultimately be necessary anyway. The plan is required to have written claims procedures. Follow them.

Given the difficulty of understanding the description and the context, any answer is speculative. I can imagine a context in which the advice is perfectly sane. It depends on exactly what the interests are, and if a QDRO has been established. The advice would be appropriate if the adjustments had to go back to the state court for revision of its order. State courts do not like to open cases that have been resolved, and certainly wouldn’t do it simply because one party wanted to revise. The best hope would be for the court to be presented with an agreed-upon amended/replacement. See Calavera’s post.

Nice! (1) Is the organization eligible to have a non-ERISA Plan (government; church)? Plan 2 can't be a 457(b) plan -- your description says it is funded. (2) Nonprofits often have strange ideas and use strange terminology. Is it possible that Plan 2 is not a separate plan, but just a separate set of accounts to hold the "excess" deferrals but labeled and talked about as a separate plan?

I am rather dismayed that this question keeps popping up. However, it is good to be reminded that the plan document controls, though I often wonder whether the sponsor is making a conscious choice to serve some policy reason or it is simply a default in the design by the document provider.

One reason for restricting beneficiary elections is the belief that a retirement plan is for the worker and the spouse in retirement, not for estate planning and maximum generational tax deferral. The roots are found in older law, now changed, but the belief is still valid, and can go hand in hand with keeping administration as simple as possible.

fmsinc’s post illuminates a separate question that is lurking inside the original post and needs to be disentangled. When a plan “learns” that a deceased participant is divorced when the plan records reflect that the participant is married, the plan does need some reasonable basis for paying another beneficiary, assuming that a non-spouse beneficiary is permissible under the plan. I offer nothing by way of identifying who is responsible for determining the marital status or what is satisfactory for determination. Good written administrative procedures are always helpful.

Proofreader’s correction: “Two DoL Advisory Opinions making it clear that the Plan need NOT look behind QDROs it receives to see it it conforms to State law or is for any reason irregular. Their only focus is to determine whether or not it's a QDRO under ERISA.” I did not read the entire text carefully. This just jumped out at me.

This is your first misstep and misunderstanding: ”When we are on notice of a divorce through the death certificate, we ask the estate or beneficiary to provide a divorce decree or separation agreement to determine if there is a possible DRO … .” Setting aside the mistaken position published by the DOL about being on notice concerning a potential DRO, the plan is not on notice about a potential DRO when the “notice” is of a divorce from a death certificate that is not presented in connection with some other form of notice expressly about an existing or prospective domestic relations order. Divorce, by itself, means nothing under ERISA 206(d)(3) and does not to require the plan to do anything. The plan has to keep an eye out for notice about a prospective domestic relations order that could affect plan interests, and the plan’s written QDRO procedures should address the detail. Shame on the plan documents you are working with. Don’t go looking for trouble. You will find it in your actions, not in duties that don’t exist. In particular, if you can ascertain that the divorce is a year or more in the past, you should have complete comfort about proceeding with the normal processing relating to payment of beneficiaries. Especially in defined benefit plans, the participant’s former spouse is in a race against death and remarriage. I am not suggesting that death of the participant precludes a QDRO, but time works against a would-be alternate payee and the plan is protected against dereliction. I also think that you are overly concerned that somewhere in ancient history the plan did not attend to a domestic relations order or an acceptable notice about prospects of a domestic relations order. The passage of time will also protect the plan, even in the case of the plan’s dereliction. Would-be alternate payees have an obligation to prosecute their claims to benefits. I would not go too far back in my search for trouble on that account, either. I am not faulting the goodwill and good intentions of your concerns. However, fiduciaries get into trouble by trying to do too much and going beyond the bounds of their duties and responsibilities while trying to help, especially when there is potential contest over benefits. Unfortunately, bad things like those you fear do happen to alternate payees, usually through the fault of their incompetent lawyers.

Definitely not. The law requires that the plan notify the plan participant of the award of some of the participant's interest to someone else. You could request that the plan send that notice to the participant without any reference to you (except that it may have to include your name). You don't want a one size fits all notice that goes to both of you with your contact information on it. I agree that your identifying information, except your name, can be kept out of the public record of state court domestic relations proceedings in most states. That is a matter for the state court proceedings that produced the order. That record is already in place.