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Peter. My local (Montgomery County, Maryland) buddies agree with you even though none of them have ever seen a direct distribution from a Roth account. Thanks for your help. David Goldberg

The court awarded my client a percentage share of her ex-husband's 401(k) account. It turns out that abut 90% of his 401(k) are in a Roth funds. I am working on the QDRO. She plans to take a taxable distribution since she needs the money now. If the distribution was coming from a traditional pre-tax 401(k) it would be income taxable to her and the Plan would withhold 20% for Federal taxes, and there would be no 10% premature withdrawal penalty under IRC 72(t)(2)(C). Since it's a Roth account, will she have to pay income taxes on a direct distribution, or will it be tax free? 72(t)(C) provides that an exception to the imposition of the 10% penalty under 72(t)(1) includes: "(C)Payments to alternate payees pursuant to qualified domestic relations orders: Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1))." So one would surmise that the 10% penalty will not apply to the Roth distribution. I guess she could take a loan or make a hardship withdrawals if she is disabled, or she can just wait until age 59-1/2. What do you think? Any creative ideas? David

The court awarded my client a percentage share of her ex-husband's 401(k) account. It turns out that abut 90% of his 401(k) are in a Roth funds. She plans to take a taxable distribution since she needs the money now. If the distribution was coming from a traditional pre-tax 401(k) it would be income taxable to her and the Plan would withhold 20% for Federal taxes, and there would be no 10% premature withdrawal penalty under IRC 72(t)(2)(C). Since it's a Roth account, will she have to pay income taxes on a direct distribution, or will it be tax free? 72(t)(C) provides that an exception to the imposition of the 10% penalty under 72(t)(1) includes: "(C)Payments to alternate payees pursuant to qualified domestic relations orders: Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1))." So one would surmise that the 10% penalty will not apply to the Roth distribution. I guess she could take a loan or make a hardship withdrawals if she is disabled, or she can just wait until age 59-1/2. What do you think? Any creative ideas? David

I am assuming you are talking about a defined contribution plan. I am assuming that the divorce is final, and that the QDRO was signed by the Court. and that a certified copy of the QDRO and was sent to the Plan Administrator, and that the Plan Administrator approved the QDRO, and that no appeal of the Divorce Decree was filed by either party. If I am incorrect in any of these assumption, let me know. A timeline is essential. Some states provide that the court will lose jurisdiction to modify (including a recission) a QDRO within a certain number of days after the entry of the QDRO (e.g. after the time to revise a Court Order has expired), or after the expiration of the applicable statute of limitation that can be many years down the road. Res judicata will apply. Some states will not permit a modification (including a rescission) of a QDRO under any circumstance if it changes the terms of the underlying Divorce Decree. Res judicata will apply. Some states will permit a modification (including a rescission) of a QDRO even though it changes the terms of the underlying Divorce Decree but only if the Court has reserved jurisdiction in the Divorce Decree to do so. Some states view a QDRO as the source of the obligation to transfer pension and retirement assets from one party to the other. Other states view a QDRO as a tool, like an attachment or a garnishment, to enforce the Divorce Decree. The ability to modify it or rescind it will differ depending how they view it. I found this online: "The question of whether retirement savings plans, such as IRAs, 401(k)s, and pensions, impact Medicaid eligibility is complicated. There are no federally set rules on these plans and Medicaid eligibility; each state sets its own rules. Adding to the complexity are other variables, such as the type of retirement savings plan, payout status, payout amount, one’s other income and assets, and marital status. "The bad news is that it is likely an applicant’s retirement savings plan will be considered by Medicaid as either income or an asset when determining eligibility for long-term care. The good news is that most candidates can still gain Medicaid eligibility and preserve some or all of their savings for a spouse or another family member. "In states that consider a Medicaid applicant’s retirement savings account as an asset, it will count against Medicaid’s asset limit for eligibility. Some states will exempt one’s retirement account if it is in payout status, and therefore generating income. However, the payments are considered as income and will count against Medicaid’s income limit for eligibility. While this does not automatically mean the candidate will be Medicaid-ineligible, this is common because Medicaid’s income and asset limits are so low." You need to check with the eligibility requirements for Medicaid in the jurisdiction in which she resides. It may not be as onerous as she imagines. It may be that she can elect to take her 401(k) as an annuity. The payments will count as income, but the total amount will not impact Medicaid eligibility. And it may only impact long term care eligibility. See - https://www.medicaidplanningassistance.org/medicaid-eligibility-401k-ira/#:~:text=California%2C Florida%2C Georgia%2C and,payments are counted as income. Good luck, DSG

Many plans have a list of beneficiaries in none is named, such as: (i) Surviving spouse, (ii) Children in equal shares, (iii) Surviving parents in equal shares, (iv) Estate. If the plan does not such a list then the money goes to the estate of the decedent and the probate court will determine who gets it. This is not an uncommon event. It might be prudent to check and see if the employee was divorced and whether or not a QDRO was issued, or whether the Judgment of Divorce or the Judgment of Divorce incorporation a Marital Settlement Agreement exists. Under the Pension Protection Act of 2006 a post mortem QDRO can be entered. David

If you don't have a QDRO in hand then you have no right or obligation to investigate whether or not some person out there is entitled to retirement or survivor annuity benefits. See the attached DoL Advisory Opinions. BUT If the Participant retired during the marriage he would have been required by the REA - 29 USC Section 1055(a)(d) that you can find at https://www.law.cornell.edu/uscode/text/29/1055#:~:text=§ 1055-,29 U.S. Code § 1055 - Requirement of joint and,annuity and preretirement survivor annuity&text=in the case of a vested participant who dies before,surviving spouse of such participant. [and see attached from the Internal Revenue Manual Section 4.72.9.3.5 and see ERISA § 205(a)-(d), and see 26 CFR § 1.401(a)-20 - answer 25(b)(3). If an employee retires while still married, the spouse will receive a survivor annuity (unless waived by the spouse) and no subsequent divorce will undo that mandatory election regardless of whether or not the parties or the judge have addressed it in the divorce proceeding.] to name his then spouse to receive a QJSA and a QPSA, and that election would survive a later divorce, unless the spouse affirmatively waived such benefits. If you have the documents he submitted at the time of retirement you should have the answer to his problem if his divorce occurred after that date. The spouse is covered for survivor annuity benefits per 29 USC 1055 and not by reason of a QDRO that is preempted by Federal law, BUT only for a share of his survivor benefits and but not for a share of his retirement annuity benefits during his lifetime. That would require a QDRO. The fact that he did not tell you he was divorced makes no difference if the QJSA and QPSA were locked in at his retirement. Let's hope you have his retirement application that would show a waiver, but even if you don't, you have the law on your side. David Advisory Opinion 1992-17A - duty of Plan Admin.pdf Advisory Opinion 1999-13A _ U.S - Sham Divorces.pdf DoL Advisory Opinion 1990-46A.pdf IRS Manual section 4.92.9.3.5.pdf

Memo to Wacko in Winnebago: One of my favorite cases is Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011) - https://scholar.google.com/scholar_case?case=4019345202025914766&q=brown+v.+continental+airlines&hl=en&as_sdt=20000003 Continental alleged that a number of pilots and their spouses obtained "sham" divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan that they otherwise could not have received without the pilots' separating from their employment with Continental. The pilots were allegedly acting out of concern about the financial stability of Continental and the fear that the Plan might be turned over to the PBGC and that their retirement benefits would be substantially reduced. By getting divorced, the pilots were able to obtain QDROs from state courts that assigned 100% (or, in one instance, 90%) of the pilots' pension benefits to their respective former spouses. The Plan provides that, upon divorce, if the pilot is at least 50 years old (as all the pilots in this case were), a former spouse to whom pension benefits are assigned can elect to receive those benefits in a lump sum even though the pilot continues to work at Continental. The former spouses presented the QDROs to Continental and requested payment of lump-sum pension benefits. After the former spouses received the benefits, the couples remarried. Continental sought to obtain restitution under ERISA Section 502(a)(3). The Court of Appeals noted that ERISA § 206(d)(3) limits the QDRO qualification determination to whether the state court decree calls for benefit payments outside the terms of the Plan. It rejected Continental’s expanded reading of § 206, concluding that plan administrators may not question the good faith intent of Participants submitting QDROs for qualification. Beyond that, 26 USC 414(p)(1)(B) provides: “(B) Domestic relations order - The term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which— “(i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (ii) is made pursuant to a State domestic relations law (including a community property law)." I don't believe any Code provision requires that the "marital property rights" requiring the transfer of pension or retirement benefits must relate only to those benefits themselves. I have had cases where one party dissipated assets and the only way to make the other party whole was to give her a larger share of the pension and retirement benefits. I had another case where the Participant repeatedly perjured himself on the stand and the judge punished him by giving my client 60% of his GM pension. I have had people trade off pension and retirement benefit for equity in the house. And in Maryland and I think in most states the trial judge has the power to award as much or as little as he/she deems the be "equitable". There is no presumption of 50/50. There is no requirement that the court recognize and adjust for the Participant's premarital and therefore non-marital portion of his/her benefits. On top of all of this, the fact that pension and retirement benefits can be garnished/attached via a QDRO for alimony or child support is more evidence that the parties can agree how much of these benefits will be transferred from the Participant to the Alternate Payee and how that amount will be computed. Sometimes the terminal date for the accrual of benefits if the date of the parties separation, or it can be the date of the divorce, or it can be any arbitrary date the parties agree upon. The Brown v. Continental case and the DoL Advisory opinions are evidence that this is a "nunya" situation. Nuya business Mr. Administrator. The Plan Administrator has a fiduciary duty toward both parties, and part of that means not interfering with their deal. For more reading in the importance of the Plan Administrator not looking behind that they have in front of them. Read Kari E. Kennedy, Executrix v. Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865, 555 U.S. 285 (2009) which you can find at - https://scholar.google.com/scholar_case?case=16253581861885772265&q=Kari+E.++Kennedy,+Executrix+v.++Plan+Administrator+for+Dupont+Savings+and+Investment+Plan,+129+S.Ct.+865+(2009)&hl=en&as_sdt=20000003 and PaineWebber v. East, 363 Md. 408, 768 A.2d 1029 (2001) - https://scholar.google.com/scholar_case?case=14624602948014812254&q=painewebber+v.+east&hl=en&as_sdt=4,83,96,109,124,146,159,290,291,292,308,309,312,313,353,354,355,371,372,375,376 David

If you are the Plan Administrator and you have "qualified" the DRO, thereby making it a QDRO, then you should do nothing until you receive an Amended DRO from the Court. It is not your job as Plan Administrator to look behind the QDRO. See attached DoL Advisory Opinions. And it is not prudent or legal to take any actions not authorized by the QDRO based on the agreement of parties unless that agreement is set forth in an Amended QDRO. It might be possible for the court to order that the payments, if they are in pay status, be deposited into the Registry of the Court, or if your attorney is concerned he/she can file an Interpleader action asking the Court to rule on the dispute. But you haven't set forth the nature of the dispute or the possible dispute. It is not clear if you desire is to vacate the QDRO or to amend it. If you are going to vacate it, there is no reason to wait. Submit an appropriate Order by Consent ASAP and be done with it. Why would you want to "lock in" the benefit for any period of time. The QDRO is already "locked in" because you have Qualified it. The Plan Administrator needs to follow the terms of the QDRO until ordered otherwise. You need to be more detailed about the status of the case and the timeline. Has the divorce judgment been entered? Was the QDRO entered after the divorce judgment was entered? Had the Participant retired prior to the divorce, in which event ERISA would have required a QJSA and a QPSA and at the happening of the divorce that election would have been locked it and the validity of a separate interest allocation would be in doubt? If the Participant is in pay status and the Alternate Payee is not, or vice versa, who benefits are you freezing? If you plan to submit a shared interest QDRO, will that even be possible if the separate interest QDRO is in place or in place and in pay status to one or both of the parties. For what reason should it "never have been filed"? What exactly is the problem? You need to be specific. Is sounds like the Participant has buyer's remorse. And you need to be careful of matters that can occur unexpectedly and cause problems. Like the death of the Participant, or the Participant retiring and entering pay status if he not already in pay status, or the Participant terminating his employment but deferring retirement, or the Participant remarrying and then retiring at a time after the separate interest QDRO is vacated but before a new QDRO is submitted and approved, in which sequence of events the Participant's new spouse will vest in the survivor annuity benefit and the former spouse will be SOL. More details needed. Keep in mind that in all of these cases you have to deal with Federal laws and regulations, state law and regulations that are normally preempted by Federal law, the written or dictated and transcribed agreement of the parties if there is one, the divorce judgment or the divorce judgment incorporating and/or not merging the agreement of the parties, the QDRO and the Plan documents. Assume nothing. David Advisory Opinion 1992-17A - duty of Plan Admin.pdf Advisory Opinion 1999-13A _ U.S - Sham Divorces.pdf

Assuming that you have a right to look behind the factual basis for his loan request, check out "bridge loan". This is a loan that a borrower may take to enable him to close the transaction prior to the time he gets permanent financing or in this case a 401(k) loan.

If he is not working then he can start his SS benefits at any age from 62 up to age 70. The younger he starts the less he receives since his life expectancy will be longer at age 62. The older he starts the more he receives since his life expectancy will be shorter at age 70. Theoretically, the present value of his benefits are the same no matter what age he starts; but PV computations are speculative based on uncertain COLA rates, discount rates, actual life expectancy and other factors. You can get hit my a bus tomorrow morning and PV computations will be of zero value. A personal story will illustrate the issue. Based on the year of my birth I could begin to receive full unreduced benefits at age 65 and 10 months. Or I could start at age 65. At 65 the payments would be $1900/month. At 65 and 10 months the payments would be $2017/month - and extra $117/month. If I started at 65 and 10 months I would lose $19,000 in benefits. The additional $117 a month from waiting until 65 and 10 months would take 162 months to recoup - 13.5 years. So I started at 65. So in addition to looking at how much a spouse will receive, think about how much will be lost if you wait. Most people who address this issue spend their time calculation how much more you will receive at age 70 without mentioning how much you will lose by waiting to age 70. Do the math.

Thank you Peter. I'm glad I don't have your job. By comparison my job is easy. I confirm that the Plan is ERISA qualified (or qualified under some other Federal, state, county, municipal or international organization law) and that benefits can be transferred to the Alternate Payee. I get my hands on the Plan's SPD and their "QDRO package" per ERISA Section 206(d)(3)(G)(ii). And I do my drafting. I live in an "I can" or "I can't" environment and don't often have to get into the statutory weeds to resolve a can/can't dilemma. None of my clients are ever going to pay the cost of legal research let alone a court battle. Having said that, there was that one time where my client was accused, but not convicted, of stealing from her employer, Bell Atlantic. They decided that it would be okay to recoup their losses by refusing to distribute her Cash Balance plan benefits to her. We won the case, our client got her money (including market increases if I remember correctly) and Bell Atlantic paid about $35,000 in legal fees to me and my co-counsel, Wendy Widmann. See attached Memo. Thanks and best regards, David Bowersox v. Bell Atlantic.pdf

Question for Peter Gulia: I should probably know this. A QJSA and QPSA are mandated with respect to a defined benefit plan. As I correct that these provisions of 29 U.S. Code § 1055(a) are not mandatory with respect to an ESOP, but may be adopted by the Plan documents? In the 36 years I have been preparing QDROs I have never came across this issue. I found this language at Pub. 6301 attached. "The law provides a special rule in the case of a money purchase ESOP. The portion of a participant’s accrued benefit under such a plan that is subject to section 409(h) (“put options”) is treated as though it were provided under a defined contribution plan not subject to section 412. Thus, if the requirements in a), b), and c), above, are met, the 409(h) part of the participant’s benefit in the money purchase ESOP is exempt from the survivor annuity requirements. 401(a)(11) 1.401(a)-20 Q&A 3" So now I'm guessing that there are different types of ESOP plans and different defaults and rules for each as they may pertain to survivor annuity elections, and options for adopting language in the Plan that can change the default - or not. Any words of wisdom would be appreciated. David p6391 (5).pdf

See the complaint in the case of Knight v. IBM filed in the US District Court for the Southern District of New York. See also attached a comment by Cohen Milstein. Without going into detail, this class action representing IBM employees alleges that the IBM had been using out of date life expectancy tables that resulted in artificially lower benefit payouts. The Complaint mentioned the fact that ERISA requires a joint and survivor annuity to be the “actuarial equivalent” of the single life annuity. ERISA §§ 205(d)(1)(B), (d)(2)(A)(ii), 29 U.S.C. §§ 1055(d)(1)(B), (d)(2)(A)(ii). Furthermore, that for married participants, the default form of pension payment is a joint and survivor annuity or “JSA.” A joint and survivor annuity provides the participant a payment stream for his own life, and then, if he has a surviving spouse when he dies, for the life of his spouse. ERISA § 205(a)-(d), 29 U.S.C. § 1055(a)-(d). The survivor annuity is expressed as a percentage of the benefit paid during the participant’s life; typically, the surviving spouse will receive 50%, 75%, or 100% of the benefit the participant received. For clarity, a single life annuity is a retirement annuity (a "pension") that is paid to the Participant for the life of the Participant and terminates on the Participant's death. A joint and survivor annuity, (a "Qualified Joint and Survivor Annuity - "QJSA"), is structured so that the share due to the Participant is shared with the Alternate Payee during the concurrent joint lives of the parties, and, on the death of the Participant prior to the death of the Alternate Payee, the survivor annuity benefit will continue to be paid to the Alternate Payee for his/her life. It is important to understand that the survivor annuity is not free. The amount of the retirement annuity will be reduced to pay the cost of the survivor annuity. The amount of the reduction is normally computed by actuaries at the time of retirement who will look at the ages and relative ages or the parties and their life expectancies to determine how much of a reduction in the retirement annuity will be sufficient to pay the survivor annuity following the death of the Participant. [Some plans, like FERS and CSRS, use a flat percentage deduction from the retirement annuity to fund the survivor annuity. Actuaries are not involved.] so.... The point is that both a single life annuity and a QJSA annuity are funded by the same pile of dollars reduced to present value. The Plan puts a certain amount of dollars in a theoretical fund and that amount can be used to pay either a single life annuity or a joint and survivor annuity. They are payment options from the same source of funding. If there is no survivor annuity election then the Participant will receive $X as a retirement annuity and the marital portion of that retirement annuity can be allocated between the Participant and the Alternate Payee as agreed or as directed by the trial court using a QDRO. If a survivor annuity for the Alternate Payee is intended, then the Participant will receive a retirement annuity of $x less the cost of the survivor annuity, and the marital portion of this reduced retirement annuity can be allocated between the Participant and the Alternate Payee as agreed or as directed by the trial court using a QDRO. If the Participant predeceases the Alternate Payee, the Alternate Payee will receive a survivor annuity equal to the option elected - 25%, 33%, 50%, 66%, 75% or 100% of the amount of the retirement annuity. Not all plans offer 25%, 33%, or 66%. All plans must offer 50% and can offer more. Note that the greater the percentage of the survivor annuity the greater the reduction in the retirement annuity to fund the survivor annuity. So there is no free lunch. Some planning is possible here. For example, if the Participant is old and or in bad health and the Alternate Payee is substantially younger and in good health, it may make sense to elect a 100% joint and survivor annuity. If the opposite is true, than a 50% or less survivor annuity may make more sense. The ultimate point is that the actuarial equivalence cannot be determined until the parties have elected or the court has awarded a QJSA in the amount of 33%, 50%, 66%, 75% or 100%. At that point the retirement annuity is reduced to pay the cost of the QJSA and you will have your actuarial equivalence. It can be any combination of retirement annuity + QJSA = the same present value = actuarial equivalence. Chris says that the Plan designates 50% as the QJSA, but that's not the Plan's choice, The Court or the parties have the option for 50% or 75% or 100%. In all cases the equivalence will be the same. Percentage of QJSA up = retirement annuity down. It's not for the Plan to designate only one option if they offer multiple options. David Knight v. IBM Attorney Comment.pdf Knight v. IBM - Complaint.pdf

I assume that you intend to modify the plan document and not just ignore the spousal notice or consent requirement. If you have actual knowledge that the Participant has been recently divorced or that a QDROis in the works, you would be advised not to make any loans or distributions until the rights of the prospective Alternate Payee have been resolved. DSG

DOL, EBSA, Field Assistance Bulletin 2003-3 (attached) provides: Qualified Domestic Relations Orders (QDROs) and Qualified Medical Child Support Order (QMCSOs) Determinations. "ERISA does not, in our view, preclude the allocation of reasonable expenses attendant to QDRO or QMCSO determinations to the account of the participant or beneficiary seeking the determination." "It should be noted that, pursuant to 29 CFR § 2520.102-3(l), [https://www.law.cornell.edu/cfr/text/29/2520.102-3] plans are required to include in the Summary Plan Description a summary of any provisions that may result in the imposition of a fee or charge on a participant or beneficiary, or the individual account thereof, the payment of which is a condition to the receipt of benefits under the plan. In addition, 2520.102-3(l) provides that Summary Plan Descriptions must include a statement identifying the circumstances that may result in the ". . . offset, [or] reduction . . . of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits . . . "These requirements are intended to ensure that participants and beneficiaries are apprised of fees and charges that may affect their benefit entitlements." 29 CFR §2520.102-3(l) also provides: "Plans also shall include a summary of any provisions that may result in the imposition of a fee or charge on a participant or beneficiary, or on an individual account thereof, the payment of which is a condition to the receipt of benefits under the plan. The foregoing summaries shall be disclosed in accordance with the requirements under 29 CFR 2520.102-2(b).” Note that if review and processing fees are not set forth in the SPD, the Plan cannot charge them. Note that the above does not apply to defined benefit plans. Note that most Plan Procedures allow the QDRO to set forth the allocation of such fees between the parties, but provide for a default if no such allocation is specified. DSG QDRO - Fees Charged to Review QDRO - Field Assistance Bulletin 2003-03.pdf

It is rare to see a Plan Administrator or a TPA prepare Plan Procedures required by ERISA Section 206(d)(3)(G)(ii) or Model Orders that do not address a "Valuation Date" and whether or not gains and losses are to be included from the Valuation date to: (i) the date of a rollover to the Alternate Payee's IRA or other eligible retirement account; or (ii) the date a taxable distribution is made to the Alternate Payee; or, (iii) the date that the Alternate Payee's share is segregated to an account for his/her benefit. Here is my Memo that might be helpful. It is noteworthy that many Plans will not or cannot compute gains and losses. IRA custodians rarely do. The law that can be read to require them to do so is ERISA § 206(d)(3)(C)(ii) that clearly allows a DRO to specify the method of determining the Alternate Payee's share. "(ii)the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined," I have engaged in pretty heated battles Fidelity who try to require that the amount to be transferred must only be a hard percentage or a hard dollar amount, neither of which will be adjusted for gains and losses. It was almost embarrassing to have to cite the above ERISA section to them. It is also noteworthy that not all plans will value their portfolios and the Participant's share thereof on a daily basis. Many do so monthly, quarterly, or in a few cases only on December 31st. The parties select valuation dates at the date of separation, or the date of divorce, or the date of actual distribution, or at other random dates. It often depends on State law. In Maryland, for example, the court values marital property for equitable distribution purposes on the date of the final divorce merits hearing. In Virginia, the accumulation of marital property stops on the date of separation. So as you might expect, in Maryland the Valuation Date will be the date of entry of the Judgment of Absolute Divorce, and in Virginia the Valuation Date will be the date of separation. DSG Gains, Losses, Investment Exp - 09-29-2022.pdf

Thoughts about what? Whether or not to fire the Plan Administrator? How to collect the loan balance due?

The TAM cited by Dare Johnson is an outlier. Read https://www.alvarezandmarsal.com/insights/warning-employee-loans-could-have-adverse-tax-consequences#:~:text=In Technical Advice Memorandum (TAM,the loan%2C for tax purposes. See the attached Memo that I prepared on this topic a few years ago. 1099-C is the proper instrument to forgive the loan from year to year. David Empl Forgivable Loans.pdf

"If the participant isn't electing to withhold anything now (understanding that withholding isn't mandatory on a hardship), can the amount taken still be grossed up (BY WHOM? THE PLAN ADMINISTRATOR? ARE YOU TRYING TO SAVE THE PARTICIPANT FROM HIS OWN FOLLY? ARE YOU PLANNING TO BUMP UP THE AMOUNT OF HIS WITHDRAWAL AND SEND 20% AS WITHHOLDING TO THE IRS? WITHOUT TELLING HIM? IN VIOLATION OF HIS ELECTION NOT TO GROSS UP THE DISTRIBUTION?) to include an amount to cover taxes to be paid later? I see discussions here on how to actually figure out how much is an appropriate amount to gross up -- we're (WHO IS "WE"? DO YOU MEAN "YOU"?) going with a simple 20% of the amount requested, for better or worse. But I don't see anything that says that if you're not electing to have the taxes withheld now, that takes away the ability to have the distribution increased for the taxes that will be due, so long as you're still under the amount that you have available under the terms of the plan." (THE AMOUNT OF THE WITHDRAWAL IS TAXABLE INCOME TO THE PARTICIPANT AND IT WILL BE PAYABLE TO THE IRS [LET'S NOT FORGET THE STATE.] WHETHER OR NOT ALL OR PART OF THE TAX WAS WITHHELD. I DON'T UNDERSTAND THE QUESTION?)

In my QDRO practice I regularly am confronted with this situation in divorce cases. The Participant either fills out the paperwork indicating that he is "not married", or he finds someone who will notarize the Alternate Payee's waiver of QPSA and QJSA benefits. The goals of the Participant are twofold. First, to avoid paying a share of his retirement annuity to the Alternate Payee per a QDRO for as long as he can get away with it. Second to avoid having the Alternate Payee receive a QPSA or a QJSA. Your case does not seem to involve a divorce, so the wife is not entitled to a share of the retirement benefits, and even if she was they would have ended at his death. But by law she is entitled to a share of his QPSA or QJSA as the case may be. See, IRC 401(a)(11); IRC 417; and 26 CFR 1.401(a)-20, Q&A 17 You are focused on recovering, vel non, (over) payments to the Participant and to his children, but the spouse cares not at all about your problems. She wants her survivor annuity benefits and will make a claim in her role as a potential beneficiary against you in you in your capacity as a fiduciary, 29 U.S. Code § 1002(8) and 29 U.S. Code § 1132(a)(1). In order to qualify as a “beneficiary”, an individual must have "a reasonable or colorable claim to benefits." Crawford v. Roane, 53 F.3d 750, 754 (6th Cir. 1995). See also Cobb v. Central States, 461 F.3d 632, 635-36 (2006) holding that to have standing as a beneficiary under ERISA, a plaintiff must show both that he or she was designated as such by the participant or terms of the plan, and that he or she has a colorable entitlement to benefits under the plan. See also Caples v. U.S. Foodservice, Inc., 444 F. App'x 49, 52 (5th Cir. 2011). In other words, you owe the wife a fiduciary responsibility to protect her interests. You cannot punish her for the sins of her husband. What that might look like I don't know. Do the Plan documents set forth a default percentage (50%) that the Participant should have elected at the time of his retirement? Or is 50% already the default per 29 USC Sec 1055(d)(1)(A). I would suggest that you now compound your problems by taking advantage of the wife's lack of legal representation. A settlement sounds like a good option. DSG

Dealing with Fidelity is no walk in the park. How about picking another recipient plan to receive the rollover. Or following the IRS protocol - https://www.irs.gov/retirement-plans/determination-letters-need-a-copy-or-a-correction for obtaining a determination letter. For the past 36 years I have prepared literally thousands of QDROs and never once had a recipient plan ask for a determination letter, or vice versa. When did this become a thing? David

It is true that you need your spouse's consent to name anyone other than that spouse as the beneficiary of your 401(k). But is it a consent or a waiver. See the attached Fidelity generic form. the language sounds more like a conditional consent. Let's assume you get that consent and you name your children as beneficiaries. Let's assume further that you remarry and now want to name your new spouse as the beneficiary. How does that work? Can you delete the children without their consent? Or do you need to ask the court to appoint a guardian of the property of the children and have the guardian consent to the change? On the date of your remarriage, will your new wife instantly vest as the beneficiary, automatically superseding the children as the sole beneficiary? Or not. N.B. Even though your current wife has consented to naming the children as the beneficiaries, the vested balance in the 401(k) plan account is still "marital property" or "community property" depending on what state where you live, and it is still divisible by the court in divorce with the use of a QDRO. N.B. None of the above applies if you are really dealing with a Federal Thrift Saving Plan account and have assumed incorrectly that the 401(k) rules applies. David Generic_Beneficiary_Form_Spousal.pdf

With respect to defined benefit plans it's all a matter of timing. If the Participant retires when the parties are still married, and if an election is made at that time for a QJSA for the Alternate Payee as required by law, then the election is locked in and no subsequent waiver will be effective to waive it. And since Federal law preempts State law, not Court ordered waiver will be enforceable. The first impression case the situation outlined above was Fox Valley & Vicinity Const. Workers Pension Fund v. Brown, 897 F.2d 275 (7th Cir. 1990) holding that a post divorce waiver was effective. Unfortunately this case was abrogated by Kennedy v. Plan Adm'r for DuPont Sav. and Inv. Plan, 555 U.S. 285, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009)." If the retirement comes after the divorce, and if part of the divorce is a MSA waiver of a QJSA or a Court ruling denying a QJSA, that would be upheld. I don't know if the same outcome would happen in a defined contribution plan. I don't know if a defined contribution plan guarantees a QJSA to a spouse. I don't know if you can elect a QJSA in a defined contribution plan prior to retirement. I don't know if all plans are now required to have QJSA under SECURE 2.0, or is it still optional. But I think it may all be spelled out at 26 CFR § 1.401(a)-20 - https://www.law.cornell.edu/cfr/text/26/1.401(a)-20 When you read this complicated stuff the use of the word "waiver" almost always relates to what the Participant does, that is, waives a QJSA for a prospective Alternate Payee. When referring to what the prospective Alternate Payee does, they say "consents" to the waiver of the QJSA by the Participant. When using "waiver" re: the Alternate Payee they are are almost always talking about the waiver language in the MSA. David

IRS Rollover Chart.pdfIRS Rollover Chart.pdf

I have had an inquiry from an attorney representing the future Payee of a TSP account. They have in hand the value of the Participant's TSP account funds at the time of marriage (non-marital), and need to determine the growth of those non-marital fund amounts from the date of marriage to the date of the divorce. I showed them how to use the share price history website to do that to show the growth in the share price between the two relevant dates. But the attorney for the Participant will not accept the TSP website data as authentic. https://www.tsp.gov/share-price-history/ and it looks like the matter will have to be decided by the court. Is there a US Code or CFR regulation that makes the website numbers on a Federal agency website presumptively authentic so that the court can take judicial notice? In this case of would be the Federal Retirement Thrift Investment Board and the TSP. Or is there some way to get a "business record" certification of the share price history between two dates? Thanks, David