QDROphile

Can you explain how your answer relates to the JPOD/MOJO combination and the validity of it?

As a matter of federal law, a QDRO can be modified or replaced as long as neither the alternate payee nor the participant has started benefits* or died before the change, subject to terms of the plan or the written QDRO procddures that protect the plan against adverse selection. State law is another matter. *Perhaps add the participant has not reached normal retirement age in a pension plan. Some may disagree.

"deferrals should continue until his 401(a)(17) limit is reached." I am confused by this statement; perhaps it makes sense in the context that I do not understand. I am concerned that this resonates with a debunked notion that 401(a) (17) indirectly limits elective deferrals. Generally, elective deferrals should continue until the elective deferral limit is reached, without regard for the 401(a) (17) limit. The plan terms may impose an elective deferral limit that is lower than the 402(g) limit, but that should be done only advisedly.

The payment can be made when the QDRO says it is to be made. In a defined benefit plan (a classic pension plan), payment to an alternate payee (you) is not usually made until the participant actually retires and starts receipt of benefits, subject to a special rule. Under the special rule, a QDRO can allow or require payment to the alternate payee to start at the participant's earliest retirement age, defined as when the participant could start receipt of benefits if the participant had terminated employment. However,the payment to the alternate payee can be made only when the QDRO says it is to be made, so you need to know the terms of the QDRO. The plan administrator should have a copy from when the plan administrator determined that the domestic relations order was a QDRO. A helpful plan administrator would simply answer the question: What is the earliest time I can start to receive benefits? Most plan administrators will provide you with a copy on request, perhaps subject to a charge for copying.

Peter Gulia's comments are correct. Most provisions of IRC 414(p) do not apply to governmental plans and most governmental plans have applicable adopted rules and procedures for QDROs that have different twists. The ERISA based court cases do not necessarily apply, either. That said, many plans are modeled on section 414(p).

First, if you are looking for help in a national forum that concerns mainly federal law, you are not going to help anyone respond by using what appears to be state law/procedure jargon, such as IDO. I am guessing that "D" stands for domestic and "O" stands for order, but I can give no intelligent meaning to "I" (play with that statement for a while!). Another difficulty is that your question mixes local pension law and domestic relations law matters, and domestic relations law is state specific. At least your moniker suggests what state is involved, for those board participants who can relate to Florida. I also do not think you are giving enough information and context for even someone versed in Florida law to understand you question well enough to respond helpfully, but maybe I am wrong and there are enough magic words to allow translation. Because you are dealing with a government, the ins and outs of dividing pension benefits will be found somewhere in statutes, ordinances, regulations, rules, policies and the like adopted by the government entity that sponsors the plan, or enacted and applicable to the entity and the plan it adopted. Is the "Pension representative" a representative of the plan or adopting entity? Usually governments have someone who is the contact for these matters. If you can find such a person, they might at least tell you what the relevant legal authority is. This is pretty tough stuff for a newbie. At least one state bar has issued a warning to its members that they had better know what they are doing before undertaking matters relating to QDROs and farm the QDRO out to experts if they do not. I think that the number complaints to the bar and malpractice claims inspired the warning,

The Department of Labor is unreliable when it comes to QDROs. The DOL also advises that a domestic relations order must specify the last known address of the alternate payee as one of the conditions for qualification. Check that against the actual statutory requirement. The information in the link that you provided does not address IRC 414(p)(5) and its implications, which is typical for the DOL because the DOL has very shallow thinking when it comes to QDROs. I did not search the site for a discussion of issues relating to the post-QDRO death of the participant; maybe the DOL redeems itself elsehwhere. ERISA has an identical provision to the IRC, so it is not a matter of differences in the statutes. Both statutes also say that an order cannot make the plan pay something that the plan is not designed to pay. When you add IRC 414(p) to the mix, it appears that a typical DB plan has two types of benefit: a benefit that is payable if the benefit starts when the participant is alive (the retirement benefit, e.g. a single life annuity or QJSA), and a benefit that is paid after the participant dies (the death benefit). When the death benefit is a QPSA (which is payable to a surviving spouse), IRC 414(p) says that the order can provide for the AP to be paid some specified portion of the death benefit (by treating the AP as a surviving spouse), but only if the order expressly includes terms to that effect. There are court decisions that adopt this view, although it may not be articulated exactly this way. I know of none that say that a separate interest includes the death benefit without the order mentioning it. If an AP has a separate interest QDRO and there is not express language regarding the death benefit and the AP starts benefits before the participant dies, then the AP is getting the retirement benefit. Once a benefit starts it is paid in accordance with its terms and the terms of most defined benefit plan benefits do not provide for a post-start modification because of the death of a person other than the annuitant. Use of the term "separate interest" is dangerous because it does not have an accepted definition. It is easy to presume too much is included in the term. The presumptions can cause provisions such as IRC 414(p)(5) to be overlooked. It is best to say what the AP gets under relevant circumstances (and the death of either of the AP and the participant are relevant in DB plans) and know the rules rather that rely on "separate interest" to express what is intended. That might lead one to consider and describe what portion of the death benefit is appropriate for the AP. Is the presumed portion the proportion of the death benefit that relates to the share of the regular pension benefit awarded to the AP? Where does that presumption come from (maybe community property states have been influential)? Why is that the appropriate portion in each case?

Yes as to your conclusion, with respect to the plan. The fourth, fifth and ninth circuit courts have ruled that the AP can get nothing from the plan because the law favors the subsequent spouse when no QDRO nailed down the AP's interest in death benefits before the second marriage and death of the participant. Only the ninth circuit's reasoning is persuasive, but the outcome is the same. In light of those decisions, and my understanding of the state law in most states, I do not think it would work to try to reinvigorate the QDRO, for example by reformation to reflect the actual intent. That might be worthwhile if the participant were alive. I refer you to my original comment that recourse may lie in a malpractice action against her lawyer, no matter who drafted the order. If she was not represented with respect to the QDRO, then I have nothing to suggest.

Calavera and Cusefan: There is no such thing as a separate interest QDRO as you (mis)understand the term. It is possible that the plan, in the plan document or its QDRO procedures, has created a separate interest that fits your understanding. Section 414(p)(5) is an example (there are more)of how the law does not recognize your undertanding of "separate interest."

Contact the plan administrator and ask, saying that you need the information for preparation of a domestic relations order in a divorce proceeding. You may have to to compel disclosure by subpoena or by having the participant request the information. Action by a deceased participant, which is implied by your title, will be difficult. If the participant is deceased, and ultimately in any case, you will have to submit a domestic relations order to the plan to receive any benefits. Ask the plan administrator for the plan's written QDRO procedures. You should get legal assistance for this, especially if the participant is dead.

Check the statute. My interpretation (and that of a number of court decisions) of the provision to the effect that the AP may be treated as a surviving spouse to the extent provided in the QDRO is that in a DB plan with a QPSA, the AP must be expressly awarded some interest in the survivor annuity or the AP will get nothing if the AP does not start benefits (the 50% portion of the pension benefit described in the post) before the participant dies. One way to look at it is that the death benefit is a different benefit that the regular benefit. If the AP is not awarded some of the death benefit, the AP gets none. While the proposition is untested, I think that the plan can adopt QDRO procedures that have a default to cover the failure to include a provision addressing death benefits (which is legal malpractice). For example, the QDRO Procedures can provide that, absent terms in the contrary in the QDRO, the result of failure to specify the AP's interest in the QPSA will be as suggested by Calavera: the AP will get the death benefit associated with the portion of the regular benefit awarded to the AP. I do not recommend such a provision on the QDRO procedures. What can be argued on behalf of the AP is that the AP should be compensated for receiving nothing from the plan by the malpractice insurance carrier of the AP's lawyer who failed to assure that the AP did not get stiffed (pun intended) by the pre-retirement death of the participant, to the delight and benefit of the subsequent spouse.

Ranting is appropriate, certainly for this subject. You have license to rant and it does not need renewal..

A government plan is not subject to ERISA. No comment on whether or not the county can maintain a 403(b) plan. Generally governments cannot, except for education institutions. Perhaps there is a historical reason that allows the plan.

"makes no sense" is an extreme conclusion. You may say that it seems incongruous with the apparent principles underlying rules that apply to qualified plans. All of the tax rules are arbitrary at some level. We try to make sense of them by discerning patterns and paying attention of statements of intent by those who make the rules.

You should be looking deeper into whether or not the plan may refund amounts withheld for childcare rather than looking into how to refund. This is a difficult case to make for a refund. Based on the very few facts provided, I would not refund amounts withheld or discontinue the withholding. More facts might persuade me otherwise. The IRS informally has said that changing or reversing an election is permissible, but the bar is very high.

Recuse yourself, CuseFan.

"Is there any type of tax deduction/writeoff on the personal federal tax return for the withholding and contributions?" For conventional deferred compensation, no.

Mr. Ruegg: Please don't feel personally attacked because of the animosity that ERISA professionals have toward the California joinder law and procedures. The Department of Labor shares that animosity and unsuccessfully attempted to have it invalidated as preempted by ERISA (biting my tongue on the behavior of the courts of the sovereign nation of California*). I would appreciate it if you would explain how it is that the law only applies to government plans and those plans that embrace it. The forms and the statute (at my last reading years ago) do not suggest that limitation and I do not think the DOL would have taken such extraordinary action if the limitation truly applies as you stated. ERISA does not apply to governmental plans and the DOL objects to pre-empted laws only because the attempt to make plan do what plans are not otherwise required by ERISA to do (e.g. those laws that try to dictate who the appropriate beneficiary is despite plan terms and procedures). If a plan chose to go wacko and submit to local courts and follow the mandates of the law, I do not think the DOL would bother with that exercise of bad judgment. In fact, the substance and purpose of the joinder law (preservation of the benefit until the judicial proceeding can resolve the interests of the parties) can be reconciled with ERISA if a little creativity is applied, but the plans should not have to contort themselves and go through a stupid paper chase to accommodate somebody's uninformed notion of a nifty procedure that facilitates practice of law by filling in forms. *Ironically, the Ninth Circuit has produced some of the most credible rulings on interesting QDRO issues.

Hooray for efforts to improve anything relating to joinders, but the only reasonable thing to do with the travesty of that California Law is to get rid of the whole concept altogether, as suggested by the previous comments. But then the California divorce bar would have to learn how to use the federal law effectively. I apologize for not reading the materials to provide constructive comments, but I do not care about the color of the lipstick on the pig.

Your post lacks important details, but it sounds like you are dealing with a defined benefit pension plan and your former spouse is a participant who died after the entry of a divorce decree but before a domestic relations order was submitted to the plan. The post does not say if a draft domestic relations order was submitted or you are operating based on comments from the plan. Unfortunately your circumstances are legally very complex. Because the Department of Labor did not do its job to issue clarifying regulations, there is much uncertainty about what can be done to assign benefits to you at this stage (both under state law and federal law). The complication involves the death of the participant and features found in most defined benefit benefit plans to limit post death payments to whatever the plan provides for a death benefit, and only if some portion of the death benefit is expressly awarded to the alternate payee. Unfortunately, you not only need someone who understands QDROs, you need someone who is better than the average bear in these matters, especially because the plan is like to be confused or resistant.

A cautious person would check the plan document to determine if the document provides for one or two plans. The prevailing practice is to treat the ESOP as part of a profit sharing plan, as allowed by a regulation under IRC section 4975, but that is not required. One clue, assuming matters are handled properly, is the filing of Form 5500. A single plan will file one. If the document covers two plans, two forms must be filed.

"These" $10,000 have to be replaced with some "real" dollars, which is the economic equivalent of paying the loan before the distribution. If the question includes the proposition that the debt be maintained in the recipient arrangement, the answer is different.

The QDRO procedures should cover the circumstances expressly and give you the answer. I would advise that the QDRO procedures of a plan that only has a death benefit for a spouse (a QPSA) should provide that for a "separate interest" QDRO (for those who presume to use that term, correctly or not), the pre-distribution death of the alternate payee extinguishes the interest and the participant's former interest (what was assigned to the AP) is not restored. If the QDRO procedures are incompetent and fail to address, I would advise the same result by interpretation and by application of the statutory language (more on that below). If the plan provides for a death benefit that is not restricted to a spouse of the participant, then the answer is not so clear, and neither is the law. It is even more important for the QDRO procedures to cover the circumstances and for the fiduciary not to approve a sorely ambiguous QDRO (as the post describes -that "separate interest" language is trouble). One can argue that the accepted (shame on the fiduciary) language means that the AP's interest included the related death benefit, so the AP's beneficiary (and who is that?) gets the related death benefit. Personally, I see in the statute lots of language about the need for express award of death benefits in order for an effective assignment of death benefits, as though there is a presumption against the implicit award of death benefits under any circumstance.

With respect to the prohibited transaction issue, the timing requirements relate to separation from the employer's assets and delivery to the trust. Credit to individual accounts is not involved. I will let others speak to the plan disqualification and contract issues (not administering the plan in accordance with its terms).

You may be conflating tax concepts with corporate concepts. Stock ownership is stock ownership; ownership is changed by acquisition/sale of the stock. A tax election does not change ownership, but it may change the tax consequences of ownership. Tacking is an ownership concept that treats changes in form (e.g. ownership of an option changed to ownership of a share by exercise of the option) or title as continuity of ownership (e.g. beneficial ownership changed to legal ownership by distribution of stock from a trust to a beneficiary of the trust).