Peter Gulia

I am not aware of a particular authority. A standard in considering the reasonableness of a plan's expense asks whether "the service is appropriate and helpful to the plan ... in carrying out the purposes for which the plan is ... maintained." 29 C.F.R. 2550.408b-2(b). Ordinarily, a fiduciary incurring expenses to be paid from the fiduciary entity must use prudence and diligence to avoid duplicative or otherwise excessive expenses. But considering differences in the circumstances of those who serve as trustees of a multiemployer pension plan's trust, it's perhaps understandable that those trustees might need to consult two or more law firms to assure that each trustee gets advice from a lawyer he or she trusts. Courts often interpret ERISA in ways similar to the common law of fiduciary relationships. However, 29 U.S.C. 186 and other Federal labor law, to the extent that it requires or prefers that a multiemployer plan be administered by trustees from "union" and "employer" classes, might vary somewhat the contours of a fiduciary's duty to cooperate with his or her co-fiduciaries.

mjb, thank you for the very helpful information.

A trustee can’t ever allow trust assets to be outside of its possession or control. For a plan that’s governed by ERISA’s Part 4, a fiduciary (including a plan’s trustee or investment manager) must not maintain the indicia of ownership of any plan asset outside the jurisdiction of the United States’ courts. ERISA § 404(b). There are some variations with some financial-responsibility conditions. 29 C.F.R. § 2550.404b-1. A recent ERISA Advisory Opinion describes a system of sub-custodianships under which every sub-custodian is a branch, subsidiary, or agent of a U.S.-domiciled bank. http://www.dol.gov/ebsa/pdf/ao2008-04a.pdf

While mjb is correct in what he or she wrote, some further background might be helpful to some readers. There are two different analyses: (1) whether a retirement plan should accept a disclaimer and, if the plan accepts it, (2) what tax effect it might or might not have. Nontax law (usually ERISA) Even if a disclaimer could qualify for some or all Federal tax purposes, it might not accomplish much if the retirement plan doesn’t accept it. A plan administrator decides whether the plan permits or precludes a beneficiary’s disclaimer, and a plan might specify (or a plan administrator in its discretion might decide) what conditions a disclaimer must meet for the retirement plan to accept it. If a plan isn’t governed by ERISA, it’s likely that at least one State’s law will be relevant in the plan administrator’s evaluation on whether to accept the disclaimer. If a plan is ERISA-governed, a plan administrator might assume that ERISA’s preemption of “State laws insofar as they may … relate to” the plan allows the plan administrator to ignore State laws. Under that view, a disclaimer complies with applicable State law because the State law that might not be met isn’t applicable. Some documents of some ERISA-governed plans recognize a disclaimer only if it complies with a relevant State’s law. And if a plan is silent on what conditions make a disclaimer, the plan might permit or require its administrator to interpret what the word disclaimer means. Federal tax 26 C.F.R. § 25.2518-1©(1)(i) states that “[a] disclaimer of an interest CREATED IN A TAXABLE TRANSFER BEFORE 1982 which [sic] otherwise meets the requirements of a qualified disclaimer under section 2518 and the corresponding regulations but which [sic], by itself, is not effective under applicable local law to divest ownership of the disclaimed property from the disclaimant and vest it in another, is nevertheless treated as a qualified disclaimer under section 2518 IF, under applicable local law, the disclaimed interest in property is transferred, as a result of attempting the disclaimer, to another person without any direction on the part of the disclaimant.” There is no similar rule stated for a disclaimer of an interest created after 1981. A possible (but not my) interpretation 26 C.F.R. § 25.2518-2 is that a disclaimer need not be effective under nontax law if its effect meets all of the conditions required by the tax regulations. In practice, it’s rare to find a disclaimer that’s ineffective under nontax law but nevertheless qualifies for IRC § 2518 tax treatment. Often, an ineffective disclaimer can’t meet the tax condition that the benefit must pass without any direction by the disclaimant. (If a disclaimer isn’t effective and thus the beneficiary/disclaimant isn’t deemed to have predeceased, what makes it proper for the retirement plan not to provide the benefit to the named beneficiary?) Likewise, it’s not clear that a disclaimer is irrevocable if the disclaimer is, under nontax law, void or ineffective. And even for Federal tax purposes, treatment as a qualified disclaimer under IRC § 2518 isn’t the whole ballgame. Although following IRC § 2518 provides some relief for some other Federal tax purposes, it doesn’t directly provide relief for Federal income tax purposes. If a disclaimer isn’t effective under nontax law (whether State law or ERISA) one might worry about what arguments the IRS could assert concerning why the beneficiary isn’t really rid of the income. mjb is right to explain that a disclaimer of a specified portion of a benefit can be permitted. Receiving the first minimum-distribution payment but promptly disclaiming all else is one frequent use of the partial-disclaimer opportunity.

Here’s an overview of a few of the wider points. A disclaimer (also called a renunciation in some States) is a writing in which a beneficiary states that he or she doesn’t want to receive a benefit. To be valid and, if desired, to achieve tax purposes, the disclaimer must carefully state specified conditions. Is a disclaimer permitted under a retirement plan? A retirement plan won’t permit a participant to disclaim his or her benefit because a retirement plan provides that a participant cannot forfeit or transfer any right he or she has under the contract. But a retirement plan might permit a beneficiary to disclaim a benefit. See IRS General Counsel Memo 39858 (Sept. 9, 1991); IRS Letter Rulings 9226058, 9037048, 8922036. If permitted (or at least not precluded) by the retirement plan, a plan administrator may accept a beneficiary’s disclaimer. If a beneficiary makes a valid disclaimer that the plan administrator accepts, the retirement plan benefit will be distributed (or distributable) as if the beneficiary/disclaimant had died before the participant’s death or before the creation of the benefit disclaimed. Tax consequences: If a beneficiary makes a valid disclaimer that also meets all requirements of IRC § 2518 (see below), the disclaimed benefit won’t belong to the disclaimant for Federal estate, gift, and generation-skipping-transfer tax purposes. IRC § 2518; 26 C.F.R. § 25.2518-1(b). Many States have a similar rule for State death tax purposes. See, for example, 72 Pa. Consol. Stat. § 9116©. The Internal Revenue Code’s qualified-disclaimer provision doesn’t refer to Federal income tax and doesn’t say that the disclaimed benefit isn’t income. But for tax years that began or begin after 1981, IRC § 402 taxes “any amount actually distributed” from a § 401(a) plan. Requirements: To be effective for Federal tax purposes, a disclaimer must meet all of the following requirements: • The disclaimer must be made before the beneficiary accepts or uses any benefit. • The disclaimant must not have received any consideration for the disclaimer. • The writing must state an irrevocable and unqualified refusal to accept the benefit. • The benefit must pass without any direction by the disclaimant. • The disclaimer must be in writing and must be signed by the disclaimant. • The writing must be delivered to the plan administrator. • The writing must be so delivered no later than nine months after the date of the participant’s death, or the date the beneficiary attains age 21, whichever is later. • The disclaimer must meet all requirements of applicable State law. IRC § 2518; 26 C.F.R. § 25.2518-2; GCM 39858, 1991 WL 776304 (Sept. 9, 1991); see generally, UNIFORM DISCLAIMER OF PROPERTY INTERESTS ACT. State law may provide further requirements. For example, in some States a disclaimer must state the disclaimant’s belief that he or she has no creditor that could be disadvantaged by the disclaimer. Even without a requirement for such a statement, some State laws apply fraudulent-transfer doctrines to a disclaimer that, if given effect, would disadvantage a disclaimant’s creditor. In some situations, especially when the beneficiary is a minor or an incapacitated person, a disclaimer may require court approval. Even when court approval isn’t required, State law may require that a disclaimer isn’t valid unless it is filed in the appropriate probate court. In addition to State law and tax-law requirements, a retirement plan may impose further requirements. Of course, this is discussion among practitioners, and not advice to anyone.

Without questioning the logic of the ordering rule that JanetM describes, it illustrates another reason for stating the ordering rule in each plan’s documents. As a plan’s creator or “settlor”, an employer may provide an employee-benefit plan on the provisions that it chooses (except a provision that’s void because it violates ERISA). But when a plan doesn’t specify what to do and the plan’s administrator makes a rule, that might be a use of discretion. It’s okay to have discretion, but a plan's fiduciary must use its discretion “for the exclusive purpose of providing [the plan's] benefits to participants and their beneficiaries” and “with the care, skill, prudence, and diligence” of a prudent-expert fiduciary. That care and the statutory duty of ERISA § 406 preclude a plan fiduciary from using its discretion to benefit itself, or to benefit a person other than the participant. It wouldn’t take much creativity for a person disappointed by smaller retirement savings (including the participant or his or her beneficiary or alternate payee) to argue that a plan administrator’s discretionary decision to favor a payment to itself over a payment to a participant’s retirement plan account is a self-dealing prohibited transaction. (The analysis might be different if the lender/employer had a legal right of setoff such that the loan repayment never became the participant’s wages.) And when a plan’s auditor asks for a “management representation” confirming the absence of a prohibited transaction, the plan’s administrator couldn’t responsibly furnish an unqualified representation. Please don’t misunderstand: I don’t say that the ordering rule that JanetM describes is inappropriate. Rather, I suggest that an employer specify the plans’ ordering rule so that each plan’s administrator will restrict its act to applying the plan without resort to interpretation.

Even if the agreements have clear "get-out" provisions, that might not be useful by itself. If the custodian is a directed trustee or otherwise has similar fiduciary duties, it can't deliver the assets until it knows that it is delivering the assets to (or as properly instructed by) a duly appointed trustee who or that is competent to serve and not known to be untrustworthy. Often, that rules out most or all of the employer's executives and their subordinates. The facts that motivate a recordkeeper or tpa to get rid of a customer often also could be used to show that a directed trustee or custodian knew (or in the exercise of proper care would have known) that the employer and its people are untrustworthy. In some circumstances, a fiduciary might use other procedures in an effort to protect plan assets.

A further question: If we accept the idea that a typical worker needs a welfare benefit with more immediacy than he or she needs a retirement benefit, what's the right priority among welfare benefits? For example (assuming all health and welfare benefits are not insured and instead "self-funded" with the employer), should a worker prefer to lapse first his or her child-care "FSA" coverage, or health coverage? One is tempted to argue that maintaining health coverage ought to be more important than saving money to become able to pay a child-care provider. But some might argue that in the absence of child-care services the parent might become unable to keep his or her job and, even with an opportunity to pay COBRA premiums, the absence of a paycheck could result in an absence of health coverage and further losses to the family. These choices aren't easy, and principled arguments might be made for a range of different ordering rules.

After first meeting any priorities required by Federal law and those State laws that are not preempted, it would seem that an employer could amend each relevant plan's governing document and summary plan description to state the ordering rules that the plan sponsor prefers. (Also, it would be smart for each salary-reduction form to include one sentence that mentions a "not-enough" rule and refer to the SPD.) A related question: what do benefitslink readers think about what ought to be the desired order when a paycheck doesn't have enough money to meet all of the contributions that a participant elected?

The preamble to the final rule [attached] says nothing about the 403(b) anti-conditioning rule. One imagines that the Treasury department would defend that particular rule as an interpretation of the word "elect" as it appears in the context of IRC 403(b)(12)(A)(ii). A counter-argument is that IRC 401(k)(4) expressly states its anti-conditioning rule, and the absence of a similar text in IRC 403(b) means that Congress didn't provide that rule as a condition of 403(b) treatment. 07_3649.pdf

You're not alone in thinking that the 403(b) anti-conditioning rule might be one that a court might decline to apply. If an employer wants to provide something that would violate that rule (and is prepared to take on a fight in defending its position after examination), it should consider buying the protection of a lawyer's written opinion that, more likely than not, a court should find that the rule is not a proper interpretation of the statute. Until there's a paying client who wants advice about the rule, it's too time-consuming to get into the arguments that support or attack why the rule is or isn't a proper interpretation.

Ohio is another example of a State that requires a public-schools employer to allow any provider: If the governing board of a public institution of higher education or the board of education of a school district procures a tax-sheltered annuity for an employee, pursuant to section 9.90 of the Revised Code, that meets the requirements of section 403(b) of the Internal Revenue Code of 1954, 26 U.S.C. 403(b), the employee has the right to designate the li-censed agent, broker, or company through whom the board shall arrange for the placement or purchase of the tax-sheltered annuity. In any case in which the employee has designated such an agent, broker, or company, the board shall comply with the designation, provided that the board may impose either or both of the following as conditions to complying with any such designations: (A) The designee must execute a reasonable agreement protecting the institution or district from any liability attendant to procuring the annuity; (B) The designee must be designated by a number of employees equal to at least one per cent of the board's full-time employees or at least five employees, whichever is greater, except that the board may not require that the agent, broker, or company be designated by more than fifty employees. Ohio Revised Code 9.91. Clause (A) has not yet been interpreted by a court decision. As mjb suggests, it's important to be careful about following State laws. Among other reasons, a "purchase" that's outside the State's enabling statute likely is void.

The attachment. per_stirpes_illustration.pdf

As Bird suggests, the attachment is an example that compares two different per-stirpes regimes. For mjb's query, a plan could specify a particular rule by stating it in the plan's text (as my earlier post mentioned) or by referring to a particular statute. However, such a provision (even with a clear warning to a participant who makes a beneficiary designation) doesn't assure an absence of competing claims, disputes, and (much worse) litigation. In almost any such litigation, the plan is the real loser because only rarely will a plan collect a reimbursement of its attorneys' fees from the non-prevailing claimants. Even an interpleader costs something. For the reasons that mjb suggests (and a few more), I write a plan (and its SPD and forms) to treat as not a beneficiary designation a purported designation that fails to specify each beneficiary by name. Likewise, these plans require a participant to specify the percentage that each beneficiary gets. Further, in my estate-planning practice, any beneficiary designation that I draft carefully avoids asking a plan's administrator to decide or compute any allocation. If something involves more than one taker (or potential taker), I advise naming a trustee as the plan's beneficiary and putting dispositive provisions in a trust document.

Those that use – or permit a participant to use – a “per stirpes” or “by representation” phrase should be aware that not all States’ laws are the same. (West’s UNIFORM LAWS ANNOTATED includes an explanation and comparison of some of the several different by-the-roots regimes for allocating a class gift; you’d find this in the comments and notes under § 2-106 of the Uniform Probate Code recommended by the National Conference of Commissioners on Uniform State Laws.) To avoid disputes about which rule a participant intended, which rule a plan administrator applies, and which rule a beneficiary could fairly expect, a plan sponsor or plan administrator should take control of defining what the phrase means. Imagine an illustration of what can happen if a plan doesn’t define this point: A participant lives in New Jersey, and works at a Pennsylvania business location of a Massachusetts corporation that’s an indirect subsidiary of a Delaware corporation that has its headquarters in New York. The plan-administrator committee meets only in New York. The trustee is a New Hampshire trust company. After signing his “per stirpes” beneficiary designation (which he does in Pennsylvania, during a business day) the participant retires, moves to Florida, and makes no change to his beneficiary designation. It happens that among these seven States there are several variations of a per-stirpes rule. Some of the participant’s children and grandchildren, who live in yet more different States, argue different ways to select which rule ought to apply. One claimant suggests Florida’s rule, arguing that, because the domicile at death governs a will’s administration, the participant would have expected and intended Florida’s rule. Another argues for New Jersey’s rule because that’s where the participant lived when he made the designation. Another argues for Pennsylvania’s rule because that’s where the participant signed all of the relevant contracts, including his beneficiary designation and his agreement to participate in the plan. Another argues that any resolution of competing claims necessarily involves the trustee and so calls for New Hampshire’s rule. The plan administrator would prefer to apply New York’s rule to every claim, no matter how strong the contacts with other States are. But the plan document has a “boilerplate” governing-law clause that could be argued to require Delaware law. What a headache! And if applying one rule or another could affect how much or how little a claimant gets, it doesn’t take much imagination to see that a claimant might make the plan administrator’s task at least unpleasant. If an employer uses a phrase such as “per stirpes” or “by representation” in a plan document (and there are many reasons why a plan sponsor might prefer that a plan preclude any possibility that the plan’s administrator ever could be required to decide a by-representation allocation), the document should define what that phrase means. The plan’s rule should include provisions for defining who is or isn’t a child of a relevant person, which generation is the starting point, whether survivors are counted as of the date of the participant’s death or on the date the claim is decided, whether a division is equal within the survivors or living persons of a generation or equal across some measure of branches of descendants Because a plan other than a governmental plan or a church plan usually is governed by ERISA rather than by any State’s law, nothing outside the plan requires a plan administrator to apply any State’s law. Concerning an ERISA-governed plan, a court should defer to the plan administrator’s prudent selection of a rule, especially if it’s one that can be fairly described as the majority view or the Federal common law of ERISA. But a plan administrator will be in a much stronger position if it applied a rule that’s clearly specified in the plan documents. If a plan allows a participant to use a phrase such as “per stirpes” or “by representation” in a beneficiary designation (some plans preclude this), the form should warn its maker that the phrase means what the plan says it means. Further, the form should warn that the plan’s rule might differ from the maker’s expectations. Although it’s easier if you’re not stuck with someone else’s document, even with a prototype plan it’s possible to fix these kinds of provisions.

GMK, you're right that some plan administrators and their service providers use extra procedures as an effort to protect plans from frauds. For example, some use appearance tests and docket look-ups to try to consider whether a paper that appears to have been signed by a judge as a domestic-relations court's order likely was so signed. One assumes that you're merely referring to what papillon described as resulting in a 'fraudulent DRO' without adopting papillon's description. However, in "QDRO from Hades", papillon didn't entirely say that the court's order was other than an order. Rather, he or she suggested that a litigant made a false presentation to the court: "My ex-wife fradulently submitted a bogus DRO that she had drafted - misrepresenting to the MO circuit court judge that it was a product of the attorneys. The judge signed ...." An outside-the-order procedure of the kind that "QDROs" described Fidelity as requesting would be unlikely to detect a litigant's misdescription of a draft order. And the fact that a draft order was misdescribed before the judge signed the court's order might be irrelevant to a plan administrator. Aside from these observations, is it possible that Fidelity's request relates to the payer's tax-reporting duties? If there is an absence of evidence (in the court order or otherwise) that an alternate payee was the participant's spouse, a payer might assume that it should tax-report a QDRO distribution as the participant's income.

I have some suggestions about how to manage this liability, but they're not appropriate for public posting. Please feel free to call me (off the clock).

Some of the rules say that an electronic means must or should be designed to deliver the information in a way "that is no less understandable to the recipient than a written paper document." Considering this, some practitioners prefer a .pdf (over .html or other means) because a print-out from a .pdf is similar in appearance to the securities issuer's printed prospectus. If attaching a .pdf to the e-mail would be burdensome to the plan's administration, a link to an appropriate Internet or intranet site from which a user may download and print the .pdf might be enough if it's accompanied by clear explanations about how to use everything (in addition to the required explanation that a participant, beneficiary, or alternate payee may require the plan administrator to furnish a paper copy). Again, I believe in making "self-service" so easy that it's obviously more convenient than asking the plan administrator. A plan administrator should consider furnishing a link only to the plan's site (or a site that the plan administrator controls), and not to an investment provider's site. In managing plan communications, a plan's administrator must act as a prudent expert would act. Some believe that it's appropriate for a plan fiduciary to consider the likelihood of participants' irrational behavior. If a plan fiduciary believes that some participants would ignore a warning that the plan fiduciary is not responsible for a third person's communications, a fiduciary might consider participants' mistaken thinking in considering whether it's in the plan's and participants' best interests to provide a link to communications that the plan fiduciary can't control.

Do you represent the participant or the proposed alternate payee? If your client’s instructions or purposes would not be met by the plan’s denial of a QDRO claim, consider, along with other ideas, some steps to sort out the plan’s decision-making: • Use the plan’s summary plan description or a recent Form 5500 to check the identity and address of the plan’s administrator. (It’s unlikely that FESCO is named as the plan’s administrator.) • If you don’t already have the plan’s QDRO-decision procedure, request that the plan administrator send this to you. • If the procedure doesn’t describe requiring the affidavit Fidelity mentioned, consider challenging the plan administrator’s failure to follow its procedure. The Labor department has stated a view that an ERISA plan’s administrator need not “review the correctness” of a State court’s finding that a natural person is or was the participant’s spouse. Moreover, the Advisory Opinion stated a view that a plan administrator may rely on a court order’s description of a person as a former spouse notwithstanding the same court order’s decision that the person never was the participant’s spouse. ERISA Adv. Op. 92-17A (Aug. 21, 1992). Some lawyers consider the interpretation suggested by the Advisory Opinion unsound, and some advise clients not to rely on it if the court’s description of a relationship is obviously wrong or internally inconsistent. However, many plan administrators find it convenient to use the Labor department’s view as a way to avoid considering whether a proposed alternate payee is or was the participant’s spouse. If the plan administrator truly requires evidence beyond the court order, consider whether your client could present other evidence that the marriage exists or previously existed. As always, if you need advice about how you go about your lawyering, it’s often smart (and sometimes required) to consult an expert.

ERISA Advisory Opinion 2003-11A observed that the Labor department’s ERISA § 404© rule doesn’t define the word “prospectus”. Following this, the Opinion states an interpretation that IF the “most recent prospectus” in the plan’s possession is a profile prospectus, delivering it would meet the § 404© rule’s prospectus-delivery condition. The Opinion also states an interpretation that if the “most recent prospectus” is a Securities Act of 1933 § 10(a) [15 U.S.C. § 77j(a)] prospectus, the § 404© rule’s prospectus-delivery condition is met only if a fiduciary delivers that prospectus. Even if a retirement plan’s fiduciary is completely confident that the profile prospectus is the “most recent prospectus”, a cautious person shouldn’t rely on this strained interpretation. Because the Opinion isn’t a rule or regulation, a court need not defer to it. Further, ERISA § 404© is an affirmative defense against a fiduciary-breach claim; the burden of proof is on the defendant to show that every condition was met. Any ambiguity concerning whether the prospectus-delivery condition was met makes it too easy for a court to find that the ERISA § 404© defense doesn’t apply. A better practice is to deliver BOTH the “full” prospectus and a profile prospectus (if any) so that a participant has his or her choice about the way he or she prefers to read. The expense of delivering these securities documents can be a proper plan expense to be allocated among participants’, beneficiaries’, and alternate payees’ accounts,

My description above assumes an ERISA-governed plan. If a plan is governed by State law, it's more likely that a petitioner might be required to, or might prefer to, pursue the plan's relief in a State court. But except for church and governmental plans (which aren't often abandoned), it's uncommon for a plan to have a remaining participant or beneficiary other than the abandoning fiduciary and yet not be governed by ERISA.

Any participant or beneficiary of an abandoned plan could sue. Although such a plaintiff eventually should be awarded a reimbursement of court costs and attorneys’ fees from the breaching fiduciary (if found and able to pay) or from the plan’s assets, in my experience few participants pursue their rights. If an EBSA investigation confirms the abandonment and EBSA is unsuccessful in getting a fiduciary to take charge, the Secretary of Labor sometimes files in a Federal court an action asking the court to appoint an independent fiduciary to wind up the plan. On an action for equitable relief, such as removing a breaching fiduciary and appointing a successor fiduciary, the Federal courts have exclusive jurisdiction (even if all parties are citizens of the same State and the amount in controversy is tiny). ERISA § 502(e)&(f). Usually, the EBSA office has lined-up its proposed independent fiduciary before the Solicitor’s office files the complaint. Some lawyers who serve as an abandoned plan’s independent fiduciary agree to serve for a limited fee that’s way below normal fee rates, and sometimes below the fiduciary’s out-of-pocket expense. Some of us are exploring doing it in a public-charity form. Because of the many thousands of abandoned plans, EBSA officials choose which cases have enough bad facts or public-relations value to use the DoL Solicitor’s office for this litigation. Also, EBSA prefers cases in which it’s not feasible for a bank or insurance company to volunteer to serve as the abandoned plan’s qualified termination administrator. However, because the vast majority of eligible financial institutions don’t accept the QTA role, after EBSA has exhausted its cajoling efforts EBSA evaluates those cases for litigation. As pro bono work, some private lawyers are willing to file a complaint without a fee, or for no more than whatever the court in its discretion awards. If you’re thinking about a particular plan and I might help you or a participant evaluate your or his or her choices, please feel free to call me.

Even without the participant's consent, a plan administrator may deliver to a participant's worksite e-mail address a return-receipt e-mail that explains that its attachments (in .pdf) are the retirement plan's summary plan description, automatic-contribution notice, default-investment notice, and the prospectus for the default investments. 29 C.F.R. 2520.104b-1©. Such an e-mail must explain the significance of the documents furnished. This means also must include "notice" (which might be one sentence) of the addressee's right to request a paper copy of a document. But if the attachments are in .pdf and a printer is nearby, those who want to read will print a document and not bother with a request.

To get QDIA relief concerning a default-invested participant, beneficiary, or alternate payee, a fiduciary must deliver to the person the QDIA notice and at least the prospectus required by the ERISA § 404© regulations – even if the fiduciary doesn’t follow other aspects of the ERISA § 404© regulations or doesn’t follow the ERISA § 404© regulations concerning other persons. 29 C.F.R. § 2550.404c-5©(4). So to get QDIA relief, a plan fiduciary (or its agent) must furnish the prospectus to the default-invested participant, beneficiary, or alternate payee “immediately following” or “immediately prior to” the defaulted-invested person’s “initial investment” in the default option. 29 C.F.R. § 2550.404c-1(b)(2)(i)(B)(1)(viii).

Some (not all) plans permit a qualified election without a spouse's consent if "it is established to the [plan administrator's] satisfaction ... that the [spouse's] consent ... [can't] be obtained ... because the spouse cannot be located[.]" ERISA 205©(2)(B). Although ERISA doesn't expressly require a court order as a condition of this exception, a careful plan administrator would not rely a participant's statement that his or her spouse can't be located, and instead would want clear and reliable independent evidence. In the absence of a divorce (or a court order of abandonment), a plan administrator that performs to ERISA's prudent-expert standard of care might insist on a Federal court order. (The testimony of an expert investigator explaining how he or she was unable to locate a person might support a court's finding.) Alternatively, a participant might find that it's easier to get a State court's order of divorce or abandonment.