QDROphile

I agree with David Rigby that the plan does not care about the dates of marriage, as such. If the plan does not get an adequate description of how to determine the interests, by periods (bounded by dates) to determine fractions or by simple numbers as multipliers and dividers, then the order will not qualify. No reference to the dates of marriage are required by the plan. The plan makes no judgment or computation based on its understanding of the duration of the marriage; it does not need an understanding of the duration of the marriage. It just needs to be able to do some arithmetic before turning to the actuarial aspects. Providing the dates of marriage does not tell the plan how to divide the benefit.

Your starting point is ill-considered. There is no statutory authority for interfering with participant rights under the plan prior to the receipt of a DRO. I know that the DOL QDRO book suggests this as a possibility, but if the DOL was confident that it was a good and legitimate idea, it should have issued the guidance in a regulation, which could then serve as protection to a fiduciary who could get sued for fiduciary breach for interfering with participant rights.* The fact that you have so many questions about how to administer a pre-DRO hold illustrates how problematic it is. In any case, why make it a plan problem when the problems lie in the domestic relations proceedings? Although few domestic relations lawyers have figured it out, it is extremely easy to achieve the same early restriction on dispossessing the future alternate payee within the existing framework that requires a domestic relations order before the plan will take any restrictive action. And if the participant is a bad actor, there should be remedy in the state courts. This is a subset of a larger set of problems with both domestic relations law and our legal and court system in general. Paying for competent legal help is beyond the means of many folks who need assistance in navigating the complexities of both the law and the delivery system. The plan should not try to solve that bigger problem by undertaking a mission to make sure everything is fair and square at least with respect to the division of retirement benefits. *A court that imposed liability for disregarding a participant's investment instructions during a pre-DRO "hold" allowed that maybe the plan could restrict if the written QDRO procedures provided for the restriction. Even if the court were correct, we don't know what such terms would have to cover, and how, to protect the fiduciary. You are asking those questions for good reason.

As they should. And the administrator should respect that line.

A QDRO is an order issued by a state court under state domestic relations law (a “domestic relations order”) that a retirement plan determines to be qualified. There is no signature requirement for the determination that a DRO is qualified. Whether or not signatures of parties is required is a matter of the state law and court rules regarding issuance of domestic relations orders. Whether or not a state court will issue a domestic relations order 14 years after the divorce is also a matter of state law. You correctly asked your question with respect to Maryland law. Maryland law is a mystery to me. As a matter of dealing with plans, leaving blank lines and spaces, whether or not superfluous, should be avoided because it may simply raise questions by the plan. Plans like certainty and regularity, and are easily spooked.

Back to my dislike of the shared interest and separate interest terminology — those terms are just shortcuts to describe a conceptual framework. They do not matter themselves and they are not precise. What matters to the plan and the parties is how the legal documents define the interest to the spouse/alternate payee (“plaintiff” in your case) and describe the disposition of the interest.

Are you saying the lawyer who wrote the terms of the decree does not understand whether the property interest described is a shared interest or a separate interest? I do not like the terms “shared interest” and “separate interest”, but I think I know what people mean when they use those terms. It looks like a poor attempt to describe a separate interest. That makes it confusing for everyone, and dangerous because of the uncertainties. The use of the term “retirement account” strongly implies that the plan is a defined contribution retirement plan. I have never seen a “shared interest” QDRO applicable to a defined contribution retirement plan. The phrase, “Until such time as the defendant retires” throws a curve into the interpretation and analysis. It does not make sense in the context of a defined contribution retirement plan and it does not properly describe the status of an alternate payee as a beneficiary, although an alternate payee is treated as beneficiary. I suspect that “covert” is intended to be “coverture”.

Going back to first principles, the origins of plan loan requirements are based on plan loans that bear no resemblance to today's current proliferation of loans from DC plans, and the idea that the loans should look to what is commercially reasonable (e.g. with respect to interest rates). Leaving my favorite aspect of loan security out of this discussion, the expectation in a commercial loan is that the loan will be repaid. Although most people, including the IRS, treat individual account plan loans as sui generis, examining the myth can be somewhat enlightening. Satisfying the criterion that a loan should not be made unless it is reasonably expected to be repaid has many paths, including having the applicant provide financial information (nobody wants to do that, either on the submission side or the review side) or servicing the loan by payroll deduction (knowing that life and job continuity are uncertain, but it is better than just relying on the good will of the borrower to submit payment and also much easier for loan administration). A prior loan default does need to be considered in a determination that a new loan is likely to be repaid, and the circumstances of the default and the ultimate payment are relevant (see Peter Julia's comments). The backstops against another default are relevant, which brings the loan procedures under scrutiny and some modification might be the ticket to greater comfort about the expectation of repayment. In any event, I think bringing the plan sponsor into the picture to resolve anything other than to make a plan amendment (which would make the plan sponsor a fiduciary -- another favorite subject of mine that tends to be completely disregarded in the area) is the worst thing that can be done. Somebody is a fiduciary with respect to making loans and that person is the one who should determine availability of a new loan after a default if the loan procedures do not cover the circumstances so well that loan issuance is merely ministerial -- which is what a lot of institutional plan loan procedures think they are so the computers can administer the loan program.

Except that you would be encouraging them to just do what they wanted to do anyway regardless of what they were supposed to do.

Have you first posed your questions to the plan administrator? You have disclosure information in the from of a summary plan description -- SPD -- and got specific information about distributions before you applied for the distribution or got the distribution. All of that information is still relevant to your questions. The plan administrator may refer you to written information or might be more helpful to by directly spelling things out relative to your personal circumstances.

I am extremely suspicious about your question. If this were a non-qualified pension, you should have been either sophisticated enough or rich enough to be able to understand the tax consequences or to hire someone to advise you about the tax consequences. I think you have a qualified plan distribution, but am extremely skeptical and cynical. There is nothing wrong with you or the question itself, but a proper characterization is important for people to give you a proper helpful response.

Next, consider what “retirement” means for purposes of 401(a)(9), especially when “current” compensation is minimal.

By what authority is the administrator increasing the amount that the order says to pay? The plan‘s written procedures should require in situations where the alternate payee is not the spouse or former spouse specificity in the amount that is to be withheld and how it relates to the amount awarded to the alternate payee. An order that fails to state the amounts, including withholding, should fail to qualify.

You do not report what kind of plan it is and you have narrowed the question concerning the nature and timing of the disclosure. I do not have any particular focus for the suggestion that it is always a good idea for someone knowledgeable to keep an eye on federal and state securities law compliance. It sneaks up on you.

Again, in my limited personal experience, contributions for a participant, or deferrals of the participant, are allocated according to the participant's investment direction on file with the plan administrator (and by extension to the investment provider). The plan should have an election by each contribution/deferral-eligible participant to identify where new money goes. This is different from an investment instruction from a participant to change an existing investment (e.g. portfolio rebalancing). I don't know the inner workings of the providers, but I imagine the plan sends money to some clearing account at the provider, not the participant's brokerage account.* The provider then allocates in accordance with each participant's investment instructions for new money. *I cannot say for any provider what is done internally. Maybe the brokerage account for each recipient is the clearing account that receives the money first before allocation according to investment instructions of the participant. That is not my experience looking at it from the plan administrator's perspective.

TIAA-CREF is in its own world.

My direct experience with a search is years old, but I think all of the major vendors can create a limited window of mutual funds only even though they can also easily provide a broader offering of publicly traded securities.

Sorry, 409A is just too touchy for me to be make off-the-cuff comments based on incomplete information. I do wonder if the “fix” takes into account the difference between capital gain income, which could have been a feature of an appropriate and timely equity arrangement and ordinary income, which is the norm for deferred compensation.

Who provides the Forms 1099-R and where does that person get the SSNs?

I am quite curious about “could become effective”. Do you have any authority under ERISA for giving an effect to an act that is ineffective (not just not effective) when performed? Please exclude acts that authorize something and designate future effective dates, such as plan amendments. I would not be confident that an ineffective act would be given later effect because of interim events that, if they had occurred prior to the ineffective act, would have allowed the act to be effective.

I am curious about who the attorney represents and what the pushback is, but don’t bother with extra work just to satisfy my curiosity. If the attorney represents participant, too bad. I assume that you do not represent any individual, so you have no obligation to convince or educate the attorney one way or another. Even if you work for the plan, I don’t think you have any obligation to argue for the correct answer. As a courtesy, you could say that the plan follows its terms, including any beneficiary designations or waivers done in accordance with plan procedures, and will give effect to qualified domestic relations orders. You might go so far as to say that a marital settlement agreement is not something contemplated by the plan or mentioned in the plan’s policies and procedures.

To take it one step further, the plan cannot be required to pay benefits in a form other than, or an amount excess of, what the plan is designed to pay as a regular benefit. That allows the plan to interpret in a manner that allows consistency in administration, and making sure that, however it interprets its terms, it does not have to pay a lump sum amount, in the aggregate, greater than the plan was designed to pay if there were no QDRO. If the DRO asserts otherwise, it is not qualified.

An AP is not a separate participant. For ERISA purposes, the AP is a beneficiary. Even a “separate interest” is part of a single benefit. I am not addressing your question directly.

I think your point is valid, but it depends on an entire reading of the plan document and written procedures, which include the forms. I can imagine that the fiduciary could interpret plan terms and written procedure terms to apply default provisions to “fill up” the difference between the sum of designated percentages in the form and 100%. The scope of imagination must be based on a an intelligent and complete reading of the documents, and a reasonable interpretation. Then, as noted in my prior message, anyone who is aggrieved can appeal, first through the plan’s claims procedures, and then to court if it needs to go that far. If you throw things first into court, you might be losing an easier and cheaper solution that is acceptable and most beneficial to all involved, the errant plan participant be damned.

Yes and the interpretation is first the duty of the plan fiduciary, especially if the plan has a decent description of fiduciary authority and responsibilities. I agree with david rigby that the fiduciary should take it as far as possible. Resorting to the courts is not what ERISA intended. A colleague of mine used to give a speech called “The Fearless Fiduciary” as a way of reassuring that ERISA was not out to get them, and offers plenty of protection for a fiduciary who acts diligently and reasonably. Anyone who is aggrieved to can then go to court.

Your divorce property settlement terms, specified in the divorce judgment/decree/settlement, determine what the domestic relations order - DRO - (to become a QDRO) will apply to. You stated that "your retirement" was to be the subject of the QDRO. That rules out anything else, but you provide no information about what your what your "retirement" is, as specified in the divorce judgment/decree/settlement. Assuming that your "retirement" is some kind of qualified plan, the divorce judgment/decree/settlement should also specify what part of the plan benefits were awarded to your former spouse. Usually the award is based on amounts and benefits accrued at the time of the divorce and a delayed QDRO will not change that. But the award might include additions and accruals under the plan(s) after the divorce date. That would be unusual. Your new spouse's assets should be safe, as well as your assets (after giving effect to the divorce judgment/decree/settlement) acquired after the divorce, except your "retirement". The former spouse would have to go back to the court that issued the divorce judgment/decree/settlement to get more. A QDRO is almost always derivative, but the plan will follow whatever is put in the QDRO that is issued by the court and should not look to the original divorce documents. It is your job to make sure nothing more is added to the terms of the proposed DRO that is submitted to the court.