QDROphile

I am confused by which years and what maximum(s) you are asking about. Absent an unexpected clarification, I agree with justanotheradmin.

You should not have to do anything new with a domestic relations order that has been submitted. The plan is required to process it. However, the new "processor" might derail what was on track for qualification and decide it is not qualified. Then you have to resubmit within whatever new legitimate administrative policies and limitations apply under the new processor. Or you can challenge. The decision might rest, unfairly, on the style and arrogance of the processor. We could talk about how a lot of the processors, like Fidelity, suck to the point that the plan may not comply with the law. And we could speculate about whether or not your DRO can be whipsawed by changes at this point. But the plan usually holds the better cards unless you have either lots of resources or a a very confident aggressive competent lawyer who is willing to work for an attorney's fee award. If you have submitted a DRO, just wait for the plan to make its move based on the determination of qualification that it is required to perform, and then decide what to do. You will have to be given a written explanation, which you can challenge, or you can choose to conform. Don't listen to informal buzz outside of the actual terms of the formal determination, the Summary Plan Description, and and written QDRO procedures. If you are somewhere else in the process, such as having informally submitted a draft DRO for "pre-qualification" (it pains me to use that phrase) then you might get jerked around more. The plan still has to follow the written QDRO procedures. You are entitled to them. Check them against what you are being told. By the way, the plan's written QDRO procedures probably also suck. Sorry. This is not an area where third-party providers (the big ones, anyway) are very enlightened. This is also an opportunity to gratuitously knock the Department of Labor. It just can't get QDRO stuff right. But at least its bias tends to be against the plan because it gets asked for help mostly from would-be alternate payees, and plans -- especially union plans -- can be obtuse), so for you it might be considered an ally. You probably don't have a fight yet, and chances are the DOL is not itching to get in one with you.

Pardon me for not answering your question (because I do not think it can be answered generically, among other reasons) and instead offering unsolicited advice. It sounds like what you need to do is explore and understand what your interest in the benefit is and how to secure it as best as possible beyond the mere award under the terms of your divorce document that you mention. That will first involve understanding what sort of 457 plan the former spouse has. In the course of understanding the plan and what you can do to secure your interest, you should encounter information about your right from the plan’s perspective to check on the benefit and your interest in the benefit. That effort should also answer your question about permissible, distribution timing and options, which, to me, is the least important feature of the plan for you at this point. You will probably need someone with expertise to guide you through all this. You will not have the convenience of procedures and disclosures that apply to division of qualified plan benefits (so called “QDRO” stuff). BTW, mention of “reckless behavior” and its details are irrelevant and not endearing.

It is a little bit more complicated for nonqualified deferred income.

Sorry, to me that statement is self-contradictory. A marital share is a portion of a benefit (a way of establishing the value of what was awarded), and I tend to read “any” as inclusive, so your former wife received a portion, as well as everything. Perhaps some more context would help. I am suspicious of “any benefits”.

You do not provide enough information for an informed response, which you should not rely on anyway and you need legal counsel if you object to what is happening currently or do not understand it. I can tell you with respect to the 401(k) plan that federal statutory law is silent about time gap between a divorce judgement and the submission of a domestic relations order that is intended to effect that judgement with respect to the plan. The plan is unlikely to look askance unless certain things have happen under the plan in the interim. However, that DRO does have to be issued by a court and that court and relevant sate law may have questions. I do not speak to Maryland domestic relations law. Whenever there is a very long time between the awarding of a right or benefit and the actual assertion of that right or claim for the benefit, one may consider asserting equitable defenses either in the state court or to the plan -- but don't expect much protection from the plan. "Equitable defenses" is for your lawyer to explain.

What do you mean by "who will pay"? What was the division of the presumed ERISA pension plan defined benefit? Were forms of benefit identified? Was actuarial value mentioned?

mal: Assuming that the plan is an ERISA plan (and if a DC or DB plan makes a difference in various details), the plan might consider acknowledging that the plan has received a domestic relations order in accordance with its assumed appropriate QDRO procedures (because the divorce decree IS a DRO) and notify the parties that it has determined that the DRO does not meet the requirements for qualification. The notice should then explain what the plan will do next, based on its determination that the order is not qualified. Because I do not know what "your" plan does next after a negative determination, it is difficult to suggest what to do next within the plan's framework. However, as a matter of my interpretation of the law and preferred principles, the plan should explain that the benefit is "suspended" (I will leave what that means to the plan) for a reasonable time to allow the submission of a domestic relations order that purports to meet the requirements for qualification. That puts the former spouse (estate) in a position with reasonable time to capture whatever is actually available under 1) state law - and there may be nothing for the deceased former spouse, and 2) federal law - yes, posthumous QDROs are possible but the devil is in the details, especially under DB plans. And shame on the Department of Labor for its completely useless efforts to comply with the Congressional mandate to provide guidance concerning posthumous QDROs, especially for DB plans. When the new DRO is submitted, it will be evaluated, and then either qualified or not. Keep in mind at that point the qualification requirement that the plan cannot be required to provide an amount or benefit that the plan was not designed to provide. Honi soit qui mal y pense.

How is it that you come to ask this question? From what perspective: plan, participant, former spouse (estate)? The plan should do as little as possible with respect to anything other than processing the receipt of a domestic relations order in accordance with it's written QDRO procedures (which reflect and are compliant with the law). If the written QDRO procedures provide for the plan to do more than that, shame on the plan. There are some things the estate can do within the framework of the law to assure time to present a QDRO-worthy domestic relations order, if it can get one from the state court, and the QDRO administrator can cooperate within the minimalist approach described in the second sentence.

If it was not a permitted distribution, what is so problematic about looking at reversing it as a correction, or the greater part of the correction?

The establishment of a nominal Roth IRA in anticipation of rolling over a Roth account later was also done to be able to get the Roth money out of the qualified plan before it got caught up in required distributions. The change in law that allows Roth accounts to be excluded from the required distribution calculation obviated the need for the technique.

I am glad that you owned up to being unable to explain why interest payments on both defaulted and undefaulted loans, all originating outside the plan, would have different treatment for tax purposes once paid to the plan by the participant. I am sympathetic to the additional complexities for recordkeeping, but I think that treating the interest as “pre-tax” in the plan as is all undefaulted plan loan interest would be simpler compared to the alternative. However, I have never had to do recordkeeping, so I do not know how accounts are best set up to track sources and earnings. The basis of the repaid defaulted loan alone is a monkey wrench in most plans. Interest on a regular plan loan does not smell like a deferral, though much has been argued about how plan loans are more or less tax favored in the repayment. I haven’t seen that argument in a long time and hope to never see it again.

Lou S: I am going to take an uninformed and unresearched shot at guessing that interest payments on the defaulted and taxed loan are “pre-tax” amounts, just as are regular plan loan interest payments, and also earnings on other after – tax amounts, such as voluntary contributions (excluding Roth).

And if the participant pays the loan, the plan will have to track basis. Wheeeee!

Plans do not run on undocumented intentions. You say there are no relevant documents submitted. What does the plan (and relevant participant documents, such as beneficiary designations) say about payment of benefits on the death of the participant, taking into account that the participant was subject to required distributions in 2023?

A 401(k) plan can be designed to allow investment in individual stocks. It depends on the product that the provider is offering. Plans with fewer assets and fewer participants tend to have fewer options and less flexibility because they cannot support the related greater administrative complexity and attention - or greed of the provider, depending on your point of view. This is a subject that an adviser should cover. The first questions should be about what you want or are trying to accomplish.

How is the adviser, or her affiliates or friends, being compensated with respect to your new 401(k) plan? If it is based on assets under management, you would understand why she would want the IRA assets in the fold. Also, there are some providers that have a minimum threshold expectation of volume before accepting a small plan because they get compensated based on assets, such as 12(b)(1) fees. But you should have been told all of this in contemplating the arrangement.

You have to know what the plan says and what the QDRO says. As a general principle, a remarriage by either the participant or the participant’s former spouse after the plan approves and recognizes the QDRO will not cause an alternate payee to lose the awarded interest. For example, most plans will not qualify an order that provides for lapse of interest upon remarriage. However, especially with government plans, what happens in any particular case depends on plan terms and the terms of the QDRO. And many things can affect the actual amount received under the interest awarded under the QDRO. See the most recent message before yours in this category.

What you were told about the benefit -- you get nothing after he dies, is not necessarily inconsistent with the divorce decree. The form of benefit appears to be a life annuity, which is common for pension plans. When he dies, nothing further is payable from the plan, so 50% of that provides you with nothing also. Something may have gone awry with the selection of the form of benefit that puts you in a position where you may not get what you expected. But there may not have been a form of benefit that would get you literally what the decree says. The benefit options and how to apply the words of the decree are complex.

You need to deal with the Plan Administrator. You need to get a copy of the QDRO. You may have to initiate a claim for benefits to get the Plan Administrator to clarify the benefits for the participant and currently designated spouse beneficiary and to get the relevant documents (such as the QDRO). With respect to a claim for benefits, request a copy of the plan's claims procedures. Though it would be a shame, you may need professional assistance to push this through if the Plan Administrator is not forthcoming with the information you would like so you can understand the benefit and the effect of the QDRO.

To to make sense of this, one must know the terms of the QDRO. One can infer some things by your statement that both the participant and the alternate payee were offered elections, but inference is not a good basis for understanding, and certainly not assurance. You could ask the current administrator now to state your husband's benefit. If you get the same answer: "Total Monthly Benefit $2,857.28; Benefit to Spouse After Your Death $1,857.23" and you are identified as the spouse, that should be it unless there is some mention of the effect of a QDRO on the benefit. If there is no mention of the QDRO, that would be consistent with the inference described in the preceding paragraph, that the former spouse's benefit under the QDRO is a separate interest that was dealt with separately at the the time of the benefit election and has no connection with your husband now. You cannot rely on anything in this message.

I would not allow a distribution after rehire in 2022 under the circumstances you described. I interpret the circumstances to be that he is expected to continue employment, although on again, off again. If there were not an expectation that he would be working again, maybe. Better yet that there be a solid expectation that he would not be working again. I would still worry about stated intent and expectation compared to the contrary inference from the pattern of working.

Yes, you are correct. But the IRS has issued guidance that allows a rollover of a plan loan, which is usually how it is accomplished since the guidance was issued. Whether or not the rollover is a direct rollover, a rollover is still a distribution. The rules on direct rollovers change the consequences that attend to a regular rollover (before direct rollovers were conceived), and, as announced by the IRS later than other changes, one of those changes is the ability to roll over loans. If the IRS says so, I will not gainsay even if the IRS disregarded general legal principles in the making of the rules. The whole system is artificial.

The plan will respond to the receipt of a domestic relations order and implement the terms of a domestic relations order that the plan determines to be a qualified domestic relations order (QDRO). Can a domestic relations order that modifies an existing QDRO to reverse essentially reverse the QDRO out of existence? It seems like one should be able to do this if the state court will issue the modifying order. I do not know if this has ever been adjudicated, but a negative answer would be based on the text of the statute: The term "qualified domestic relations order" means a domestic relations order— (i) which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, *** The modifying order does not do any of that. The modifying order would either (1) strip the alternate payee of an interest in the benefits that the alternate payee has under QDRO #1, or (2) recognize the participant's right to or assign to the participant an interest in the plan that the alternate payee has/owns under the plan pursuant to the QDRO #1. But to paraphrase a lyric from Fiddler on the Roof, "Would it spoil some vast eternal plan to implement such an order?" Who is going to complain? If the plan keeps appropriate boundaries on how it engages, it won't be part of the conspiracy to defraud Medicaid. 🤐

I wonder if a loan policy document can create a protected form of distribution benefit. What does the plan document say about distributions? For example, does the plan document provide for in-kind distribution? Does absence of an in-kind distribution provision preclude sneaking in a form of benefit under a loan policy? Does the loan policy controvert, or supplement, the distribution provisions? Similar question with respect to the language in the core plan document regarding loans. Does the core plan document enable or restrict what may be in a loan policy? By the way, the IRS position on loan rollover is mistaken. A loan cannot be rolled over because under traditional loan rules a loan is extinguished when it is delivered to the borrower. That is what happens when the loan is distributed. But I am not going to argue against a gift from the IRS, and I believe it to be a good policy even if it lacks legal foundation. And maybe the IRS was within its power to make up new law and make exception to the fundamental concepts.