QDROphile

What you mean by “sold” matters. You might find guidance in a plan of disposition (sale agreement)/dissolution/liquidation.

I refrained from commenting on Effen’s original answer to the question about time lapse in submitting a domestic relations order to the plan because that answer is quite sufficient for practical purposes, and another more sophisticated and complete answer will be fraught with difficulties and complications involving matters of state law as well as what are called “equitable” concerns and principles. That won’t help you much. Furthermore, there are few regular responders in this forum who would venture to advise you about any specific action for you to initiate.Your situation is very dependent on facts and circumstances and lacking in adequate information upon which to act. The information you have been advised to pursue is relevant, but will be insufficient by itself to help you decide what to do.

First, be careful not to conflate “plan sponsor” and “plan administrator” even though it is a common mistake to name the plan sponsor as the plan administrator. If the plan sponsor is named as the plan administrator, it can still be important to make sure one understands the separate roles of the sponsor and the administrator, and make sure the right hat is being worn in any action or decision, even if the hats are on the same head. Next, your question is really bigger than whether or not plan documents are required to be provided under the circumstances. The choice about providing plan documents, even if they are not required to be provided is not trivial if somebody is looking for trouble. Perhaps that bigger question is not really your question, because it is really a question first for the plan administrator and you are probably not providing comprehensive advice about how to respond to the request for documents. Apologies for not giving a direct answer to your literal question, but your channeling of a definite answer might actually be a bad thing for the ultimate recipient. I will offer a footnote answer. If the former participant decides to make a claim for benefits (under a theory that the amounts actually received were the wrong amounts because of some mismanagement) the participant eventually will be entitled to examine plan documents under the claims procedures.

Mark: Nobody was advising you what to do or not to do.

JM: Certainly a 14 year lookback is a potential multiplier, and is one of the factors that figures into the consideration. Another consideration is the award amount at the division date. For a lot of folks $400K is big number to be multiplied. Thank you for responding with an explanation that went with a real life illustration. Don’t get me started with Fidelity and its approach to QDRO servicing.

The algorithms for calculating gain and loss may not be perfect. But how much would perfect cost? You have the cost of the expert. Somebody has the cost of going back to the court to obtain a domestic relations order that has a different formulation than in the divorce decree, which means arguing to the judge if the other party opposes the departure from the divorce decree terms. I am not advocating one way or another, but consider how much money and how much difference is involved before working against a well-established system. Also, the time lag involving calculation and approval by the court and submission and approval by the plan will mean that earnings and losses will have to be brought down through the time that the domestic relations order is determined to be qualified and the alternate payee sub account is established – if you want perfect.

Assuming that your retirement plan is a defined contribution plan, such as a 401(k) plan: After the plan determines that a domestic relations order submitted to it for purposes of dividing the benefit is a qualified domestic relations order (QDRO), the plan will establish a sub account for the alternate payee (your ex) and determine the initial balance of that sub account in accordance with the description in the QDRO, which should mirror the description in your divorce decree. How the plan will accomplish this depends on what service provider handles the accounts and the investment management. The large commercial operations (Vanguard, Fidelity, Schwab, various insurance companies) typically use algorithms to bring forward the initial balance of the sub account as of the date of the divorce decree to account for the investment results up to the point that the sub account is actually established. Once the sub account is established by subtraction from your full account balance, the sub account takes care of itself with respect to earnings and losses, and your remaining account is unaffected going forward. The “until … the date of distribution” language becomes irrelevant to you. One problem with delay is that it makes bringing forward investment earnings more difficult. Worst, if in the interim the plan changes its investment provider, the usual methodology for bringing forward investment earnings will not work in many cases because the new provider will not have adequate records and information for the account in the time before the change in providers occurred and will not be able to do the calculations from the date of the divorce decree through the date that the new recordkeeping began. If that happens, you and your former wife may have to figure out your own way to estimate the your balance as of the date of the divorce and the investment earnings on the amount awarded to the alternate payee going forward until date sub account is actually established. I use the term sub account to be technically correct. The account for the alternate payee will look like a regular account for the alternate payee, and will function as such in almost all cases. My use of the term investment earnings includes both earnings and losses. If your ex was clearly assigned the responsibility for preparing and submitting a domestic relations order to the plan, at some point your ex’s ability to enforce the divorce decree terms could be compromised to some degree. That means that any difficulties in trying to comply with the terms of the decree through a domestic relations order could fall more heavily on your ex. But everyone will be burdened by the mess.

What does the plan document say, including provisions concerning the scope of the fiduciary's discretion to interpret plan provisions?

Hmm. That’s only a small step away from, “With actuaries, all things are possible.”

The usual way to reach a private pension benefit to collect or secure child support is through a domestic relations order that is recognized and determined to be a qualified domestic relations order by the pension plan when the participant is alive. It is best done at the time of divorce or establishment of the child support. Also, agencies that are responsible for overseeing child support (e.g. those that provide or administer government support for children) should be familiar with the approach, but the law is very specialized and complicated, and is often not understood or properly employed by the officials. Complexity and difficulty increase markedly when the participant dies before such an order is established. It may be too late, especially if the death beneficiary is a subsequent spouse of the participant. A description of any possible path is beyond this forum. Unfortunately, you need to find someone who is expert in these matters, including Texas domestic relations law, to assess. I am skeptical that liens can be effective, which may be why no one is pursuing them. But I am not able to comment competently about such matters.

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.