QDROphile

"Can all "civil" lawsuits involving a benefit covered by ERISA be removed to Federal Court?" No. Unless the issues relate directly to benefits under an ERISA governed plan, the jurisdiction questions become very difficult and fact specific. Removal occupies a significant space in a law school civil procedure class. I doubt that this forum is well suited for you to progress toward the particular answers you seek. If the parties are engaged in civil litigation already, that is a question for the lawyer of the party who is interested in removal.

What is the last transaction or plan communication in this story? A domestic relations order with a “judge seal”, as requested by the plan, was submitted to the plan. Is that it? Has there been any communication with you since submitting the order? What and when was the last communication from the plan to you?

The knowledgeable custodian, or perhaps the accommodating trustee, who are both effecting the transfer, should have the answer to that question as well. 😉

Apologies. It looks like I misread your questions. Are you saying that (1) the fiduciary acted in disregard of provisions stated in a form and provisions stated in the SPD*, and (2) the provisions in the form and SPD were not inconsistent with core plan document adopted by the sponsor? Part of the analysis gets us into the question of what is a plan document. It still involves questions of interpretation and it still requires a reading of all of the relevant provisions in the plan and the administrative documents. I don't think this forum is conducive to that kind of review. *There is also a question relating to the required timing for revising administrative and disclosure documents to reflect changes in the law or the plan. The fiduciaries have to act in accordance with the effective new governing standard/provision before the documents are required to catch up to the changes.

This sentence: "Plan document " DOES GRANT the Named Fiduciary seemingly all encompassing powers to make determinations of fact, determine who the "rightful" beneficiary is ,etc. etc." does not suggest that a named fiduciary could "ignore/disregard/override written conditions on THEIR OWN forms and in their own SPD". The sentence does suggest that the plan document authorizes some fiduciary to create an administrative structure -- including forms -- that is not inconsistent with express plan terms. ALL plan terms have to be considered in evaluating the amount of discretion given to the fiduciary to administer the plan and whether or not some proposed action or administrative policy is within the scope of authority and not inconsistent with plan terms (reasonably interpreted).

The plan is required to communicate the disposition of the domestic relations order* to the plan participant and the alternate payee, and their respective lawyers of record (if identified to the plan). The plan is under a fiduciary duty not to communicate otherwise. You can request whatever you want, but the plans actions and restrictions are pretty well determined by law. *Such as whether or not the order is qualified — whether or not it is a QDRO — and any particular interpretation by the plan of what is awarded to the alternate payee.

It depends on what the resolution and the plan say. Depending on what the plan requires, a resolution can effect changes, e.g., serve as the amendment itself. Or a resolution might authorize an agent to take action, such as adoption of an amendment, in accordance with the terms of the resolution. The entire context is relevant and corporate, agency, and contract law are implicated.

Subject to the terms of the plan document, beneficiary designation and allocation details are usually left to administrative procedures. While on the one hand, that means that amendment is less cumbersome if administration is friendly to participants. On the other, in these days of computer administration, the system might be rather limited and inflexible about what it will accept. Thank the provider for its self-interested off the shelf arrangements. That said, an accommodating human administrator might dread the confusing, inept, and ambiguous designations and allocations that inexperienced drafters come up with. A retirement plan is not meant to be a vehicle for fine-tuned estate planning. Who wants to struggle through difficult interpretation?

Another contact would be the 401(k) plan administrator. "Plan administrator" is a term that is used to mean several things, unfortunately, including a service provider that may be a mutual fund company, a brokerage company, an insurance company, or another financial institution. Who communicates to you about your account in the 401(k) plan? If you contact the employer, which is a good start, the employer may refer you to the plan administrator.

Sorry, I did not read the entire monograph. What I did read focuses on an important matter that is not relevant to the question at hand in this thread. The latter part of the monograph may address the question of a specified dollar amount, so my apologies if I have unnecessarily jumped on the first part without acknowledging that the monograph gets around to what is relevant here. The monograph begins by focus on when the alternate payee’s interest is determined, usually as a function of some date relevant to the divorce, such as when the divorce is determined to be final. The examples relate to determining a percentage of the participants account as of that key date. That amount, with the presumption of crediting earnings and losses until the “segregation” date, which I have referred to as the date that the plan actually creates the alternate payees subaccount, needs to be preserved through the interim time before implementation under the plan to be able to give effect to the words of the domestic relations order and the intended economic value of what was awarded. An award of a specified dollar amount is outside of the considerations described in the beginning of the monograph. The specified amount is determined without respect to any particular historical date in our case. The order itself instructs the plan administrator to simply use that specified amount when the administrator establishes the subaccount, and then give credit for earnings and losses after that. That is a clear statement of the intent of the court and the parties, which should be the determining factor in implementation of the order, not some state law legal presumption that involves a determination of amount that is dependent on a particular date rather than a specified amount. And, while abstract notions of fairness would suggest that determining the value as of the divorce date is the “correct” approach, it is rational for the parties to pick a specified amount, that the alternate payee is entitled to receive as of the time the amount is established under the plan, without respect to what the financial markets have done between the date of divorce and the time the plan gets around to establishing the sub account and making the amount available for distribution. The parties may have intended to protect the alternate payee against losses, at the possible expense of foregoing interim gains. That is for the parties to decide or the court to determine if there is some contest. It is certainly improper for a plan fiduciary to try to look into the purposes and intents of a domestic relations order and override the terms of the order (citations omitted, but available, and that’s THE LAW).

I read Paragraph 8(ii) to provide that investment earnings and losses do not accrue on the alternate payee’s specified dollar amount until the subaccount is actually created and the amount credited to the sub account (and allocated among the investment options, if that is what the plan usually does). This approach is very easy for the plan to administer because the earnings and losses take care of themselves and do not have to be calculated as part of establishing the alternate payee’s interest.

Some thought should be given to securities law compliance, often overlooked in multiple employer 401(k) plans. There is a Benefitslink topic on the subject. I don’t know if there are federal exemptions for church related organizations, and don’t forget state securities law.

If the order specifies a dollar amount, but says nothing about earnings, it is reasonable to establish the alternate payee's subaccount with the specified dollar amount as of the date the plan administrator gets around to establishing the subaccount. If the order states a date of "segregation", a reasonable QDRO administrator (the relevant fiduciary, which might be the plan administrator) might still interpret the order to provide for a specified amount whenever the subaccount is established. As observed by others, the statement of a date injects ambiguity because the fiduciary will recognize those words as having a meaning associated with investment earnings. The notice of qualification will state the fiduciary's interpretation by stating whether or no earnings will be awarded. That allows the parties to appeal (to the plan, not the court) if they don't agree. That might be the smoothest way to proceed. If they appeal, the plan will have to disqualify the order for failure to specify the amount to be paid (unless the parties agree in the appeal on the implicit award of earnings and how to calculate them) and then everyone is back in the same position as suggested by not qualifying the order in the first place. In any event, the relevant fiduciary is the one to interpret the order and should express that interpretation (including an interpretation the the order is ambiguous) in the notice of qualification or not qualification. It is always nice for the written QDRO Procedures to state that, as a condition of qualification, the order must make an express statement about the award of earnings. Responsible drafters of DROs will read the QDRO Procedures, but responsible drafters of DROs will also know better than to omit specific terms about earnings. The QDRO Procedures might also say that a DRO will be presumed to recognize time value of money and that absent an overriding instruction, the plan's usual administrative procedures* for calculating earnings on an award to an AP will apply. Again, that might be a quicker route to the intended outcome than immediate disqualification. The plan has at least a chance that it will choose what the parties intended (if the parties actually thought about it). And, sadly, even if the Plan's default is not what the parties intended, everyone may be so relieved to get on with life that they won't appeal, thus saving the Plan from further rounds of dealing with incompetent drafters. Obviously, I am used to looking out mostly for the plan. It is dangerous for a plan to try to look out for the competing interests of individuals in a divorce. *Which might include such other things as (1) creating the AP's subaccount with a proportionate share of each of the participant's investment accounts, or (2) investing the AP's subaccount initially in the Plan's default investment, or (3) stating any unvested balances will be allocated between the participant and the AP.

Your last paragraph illustrates why naming the employer as the fiduciary with discretionary authority is a bad idea. If the employer is the fiduciary, that creates a presumption that the directors and the senior officers are the warm bodied persons who are acting as the fiduciary (and therefore potentially have fiduciary liability) because it is through those persons that the employer acts in any capacity. If those persons do not know that they are potentially responsible for fiduciary matters, it is impossible for them to properly discharge their duties. I think the directors of a corporation would be totally surprised to know that they have some duty (and potential liability) with respect to plan administration, even though many D&O and E&O policies cover liability to some extent. Instead, the appropriate persons (the persons who really have the responsibility and should be attending to it) should be designated by name or office as a named fiduciary. For example, the CEO could be designated as the named fiduciary for the plan. It is likely that the CEO is going to be making discretionary decisions anyway (such as engaging the trustee and naming other fiduciary with specific roles), so make it explicit. You still have the problem that if anybody involved with the plan does not know their job or do it correctly, and oversteps into fiduciary action, that person is potentially going to have fiduciary liability. But if all fiduciaries are named and their respective duties defined, they have a fighting chance of acting correctly in their capacities and not overstepping into the province of another fiduciary’s responsibility.

The employer, other than a sole proprietor, should never be the sole or the discretionary fiduciary except to the extent of the initial appointment of the discretionary fiduciary. Your (dear reader) puzzlement or immediate vehement disagreement with this assertion is the best evidence that the proscription is not observed.

Because the critical aspect of my response has been emphasized, I wanted to reiterate the reassuring part. I doubt that it is your fault that the plan has rejected submissions. The plan will not give your ex spouse the entire retirement benefit simply because of firing before the plan accepts your court order as a qualified domestic relations order. However, if certain things happen, or fail to happen, after the firing and before the order is determined to be qualified, you could lose your entire interest in the benefit. It is too complicated to walk through the possible scenarios and touch on all of the procedural requirements to be able to say that you are completely safe. It appears that the plan has been engaged, has been notified of the domestic relations proceeding, has received communication about the award of an interest to you, and will continue to be engaged in processing what you hope will eventually be a QDRO. This probably protects you as long as the as qualification processing is being pursued diligently. The devil is in the details and there are many devilish details that we do not know. Next to incompetence, delay is your biggest concern.

If proper procedures were followed in court and with the plan, the pension is preserved and suspended for a reasonable time until resolution of qualification of the domestic relations order. However, having domestic relations order “sent back twice” does not bode well for following proper procedures or knowing WFT needs to be done.

I am surprised that the independent fiduciary is not already involved in various aspects. Perhaps it is a special purpose independent fiduciary with very limited scope.

This is a delicate situation. The fiduciary will want to have the benefit of advice of competent legal counsel as a matter of prudent administration and, separately and cynically, protection from liability. That makes any specific observations in this forum irrelevant. Gratuitous comment: ESOPs tend to provide the most difficult fiduciary problems because ESOPs have so many incompatibilities with ERISA principles.

Piling onto what others have offered, it is a drag to try to determine numbers that fit the concept of how you want the benefit divided when you have inadequate records to check those numbers. However, rather than just apply a knee-jerk concept, the parties or their lawyers should have considered the availability of data in the first place and crafted a division, based on either what you know and can agree to project backwards or simply arrive at some sort of equitable division rather than cement an impossible-to-apply formula into divorce judgment/settlement. It is unreasonable to expect you to have thought of it, but the lawyers, if you had them, should have. Unfortunately, if you did not have lawyers in the divorce proceeding with an eye on an eventual QDRO, and most divorce lawyers do not have that perspective, you missed the best window and are going to have to go back and rethink how to make sense of what you do know based on records that are available. It is the responsibility of the plan to provide records that it has or reasonably should have. If the plan has terminated, or has changed administrative service providers, it is likely that the available history does not go back far enough to suit your needs. I would try on the idea that the lawyers owe you some accommodation in trying to collect and put the pieces together to come up with some solution, albeit artificial and somewhat arbitrary in some of its aspects.

Always beware that there are things that people in the “forefront”* of ESOPs know that ain’t so. *And in the backrooms of the ESOP Association.

This appears to be a matter of state (CT) law, as is the concept of “automatic orders”, and would be strange to most everybody who participates in this forum. Maybe you will get lucky with a response by someone competent with CT law. The only thing I can offer you, after hesitation and some misgiving, is the principle that the statute of limitations is commonly “tolled” (essentially meaning that the running of the statute is suspended) if the breach is concealed (you mentioned collusion) but only until the victim learned, or should have learned, of the breach. However, the application of the statute of limitations is determined at the trial level, and if not brought up at trial, it might an issue that the appeals court will not consider. Furthermore, this is a highly technical, legal argument, the details of which are beyond an untrained person. The explanation of the principle is not legal advice. At best, it is a suggestion of something you might get legal advice about. Unfortunately, the system is difficult (if not impossible), complex, and expensive, especially when you are going back in time to undo or re-examine something that was decided in the past. But you know that already.

Could you elucidate on what you mean by the “make whole” principle/rule?

Speaking of partners, which you did not, are there any other ERISA lawyers in your organization? They should be your first consult after doing the fundamental work and then hitting a snag. If your organization environment is based on fear and criticism (which might be making you averse to seeking in-house guidance or assistance) rather than cooperation, camaraderie, and mutual advancement, you don’t want to work there. Maybe it had been determined that nobody else knew the answer, either, and you got the short straw. Still, reporting back for consideration by others after your analysis and learning should not be shameful. If you are on your own, then bless you. ERISA legal expertise and practice is awfully difficult and scary to develop by yourself.

To expand on "go back in time" (a great answer), a common approach is to terminate the plan of the acquired company before the closing of the acquisition and encourage the participants to roll over into the new plan. I am not a big fan of this, but it somewhat alleviates concerns about inheriting problems of the acquired company's plan and eliminates the grandfathering. I say "somewhat" because the acquiring company is probably stuck with the aftermath anyway (many plan participants will now be employees of the acquirer) unless unusual special arrangements are made for someone else (the stock sellers?) to be responsible for any post transaction problems. I don't like tempting participants to take distributions early because of the opportunity presented by the plan termination.