QDROphile

Hahaha. The "pure" tax lawyers in my firm were perfectly happy to leave the "low 400s" of the tax code to the ERISA lawyers.

It is heartening to have someone do the right thing and pursue the outcome agreed (mandated?) in the divorce even though a more favorable outcome is possible now, possibly at the “fault” of the former spouse. Especially if if the former spouse was charged with prosecuting the QDRO (which is usual, as noted by david rigby), consider having your former spouse share the cost of however you go about obtaining a QDRO that reflects the original agreed/mandated terms.

The law allows a "reasonable time" for correction of any defects in a proposed QDRO. 18 months is a time that is often mistakenly considered to be the reasonable time, but 18 months might just happen to be reasonable under the circumstances. If the reasonable time expires without some action or further notice, the plan proceeds as though nothing had been submitted. If you are the plan participant and it has been years with no intervening action, the pension should start with payment in full. It would be a breach of fiduciary duty for the plan to delay start unless there is some order applicable to the plan for delay. What that might be, I cannot imagine. If you are the would-be alternate payee, then see Effen's post.

We can speculate all we want, but there is the suggestion that the order that has been presented to the IRA custodian says “look for a QDRO to determine what the division of the IRA will be.” If that is so, the Edward Jones agent does not have authority or sufficient information to divide the IRA. Quite the contrary. And, something that resembles a QDRO, even though one is not necessary (or even “wrong”) can be the instrument that is effective for division of the IRA. I agree that a postmortem order could be problematic in any event, but if the existing order does not provide adequate information about the division, the IRA custodian cannot act on it.

You reported, "We have brought in an additional attorney who works specifically with QDROs." That person is in the best place to answer your questions and address what I perceive as document mistakes relating to terminology. Questions relating to Ohio domestic relations law remain.

Let me be the first to offer you ultimately unhelpful responses. 1. The division of IRAs does not involve qualified domestic relations orders (QDROs). A different section of the federal tax code applies. It is possible that the separation agreement meets the requirements for the division of the IRA. 2. Depending on what the separation agreement says and the status of the separation agreement under Ohio domestic relations law, the divorce documentation might be effective to provide for transfer of the interest in the IRA to the decedent’s estate, without more. Or, Ohio domestic relations law will govern the ability (or not) to modify or supplement the existing documentation to effect the division. 3. The drafter of the domestic relations documents (one would hope for a competent lawyer) would be a good place to start to figure out where this stands and where it might go. I am curious about what “I have a unique case” means. Are you an Ohio lawyer?

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?