JM

QDROphile...completely agree!

The case I was brought in on in LA cost the client $800 to do the 14 year calculation (from their date of separation to current), and the delta on what Fidelity paid the alternate payee vs what they should have was almost $100k difference. The intended judgment was simply for AP to get a $400k from 14 years ago adjusted by gains/losses...Fidelity did their very quick method of allocating gains/losses which yielded $100k less to AP than what it should have been (because Fidelity improperly weighted the contributions in favor of P over that time period). I was brought in to show the court that the AP was not trying to reach over the fence and take what was not awarded to them, I showed everyone the AP did not receive as much as was intended by the court and parties 14 years prior. P agreed Fidelity's calculation was inaccurate and the amended QDRO was entered. I'm not implying this case will have a similar outcome but it's not that costly to update and in my opinion well worth the extra money to ensure accuracy. It can be much more costly to have to go back and fix everything if post-Fidelity calculation the AP (or the P) discovers things were not done as accurately as one would hope!

Hello Mark, If the plan has records going back to the award date (which if they changed record keepers then they may not have them all), but if they do then the QDRO will put the burden of the investment gains/losses calculation the plan itself (which is where Fidelity/Vanguard/Empower comes in). However, just letting them do the calculation is ill-advised. I have testified on this very issue in CA courts that Fidelity/Vanguard/Empower methodology for making this calculation (as others have alluded to above) is flawed. If the market has returned gains then it would be in your favor, if the market has returned losses it would give you more of the losses. Regardless, it is not as accurate as you would expect and therefore I would recommend having someone manually calculate the current award and then revise the QDRO to match. That way you see the amounts now BEFORE you enter into the court order (QDRO).

Gabriel, as a court qualified expert witness (in both equitable division and community property states) in the actuarial valuation and division of retirement plan benefits ((Q)DROs), I agree with everyone's comments above. Yes it is possible to calculate the actuarial present value of your former spouse's interest, which would include any/all survivor benefits, and you could offer an equivalent amount from your 401(k) or IRA to balance, but now you would be giving her a lump sum cash payment via another (Q)DRO and you would be taking on all the risk associated with your defined benefit plan (what if you die very early? Many plans have a higher cost of switching survivor benefits and/or beneficiaries now that you are older, interest rate risk, etc). However, if you and your attorney would like to discuss and even get the actuarial valuation done just to see what the numbers would look like then I can help. If interest you can message me directly and we'll get the ball rolling.

GOOD FOR YOU!! 🏌️‍♂️

Hahaha, that made me chuckle. . David Rigby, do you still provide actuarial consulting in domestic relations matters? I've been providing actuarial valuations and expert witness testimony for all types of plans (public, private, non-qual, federal, etc) for 26 years in CA and now several other states. I enjoy the work and helping people hopefully reach settlement.

Hi Bill, I checked with my colleague in NY and she said to please refer you over to her for assistance in vacating your prior COAP (Court Order Acceptable for Processing). Her name is Erin Colgan and she is an attorney with Angiuli & Gentile, LLP. (https://www.aglawnyc.com/attorney/colgan-erin-k/) She deals with (Q)DROs in NY and will be able to get you going down the right path. Cheers, JM

Hi Bill, if the intent was to keep your former spouse eligible for FEHB then the award should have been $1/mo in both your retiree annuity as well as a $1/mo FSSA (former spouse survivor annuity). I prepare those orders all the time and honestly, it's worth keeping intact just in case.

MIchelleMaz, what type of plan are you talking about? ERISA or a public retirement? The calculation depends in part on what type of plan we are talking about because some public plans do allow you to do a shared interest DRO (becuase they do not permit a separate interest), and then some also allow you to carve out the former spouse's share via the coverture fraction first and then have a J&S applied to only that portion of former spouse's awarded share. So in that instance you would apply the coverture fraction first, apply the J&S factor to former spouse's share only and the participant can retire without a J&S applied to their remaining share. I do a lot of pension valuations for all types of plans in community property and equitable distribution states so I can say there is no single answer until we have more detail on which plan is being divided!

There are no regs on who pays the cost in a QDRO for the QJSA elected at retirement and I think it's more of a state issue, not federal. For example, in CA an election made at retirement that includes a survivorship cost is not deemed a gift from participant to alternate payee upon divorce. So if the plan is an ERISA plan in which a reversion is required (if AP dies first they cannot name a beneficiary and must revert back to P), then we have the parties split the survivorship cost which balances the fact that the AP is getting a survivor benefit but also that P is getting the "quasi" survivor benefit (the reversion). Actuarially speaking it's approximately equal if the parties elected the 50% J&S and are somewhat close in age. If non-ERISA and a public DB plan then we can assign the full cost of the survivorship to the former spouse and also say they can name a beneficiary if they predecease the P (no reversion).

Emme, contact the law offices of Anne P. Schmidt in Chicago. Top notch employee benefits and QILDRO attorney.

Hello broomrider, You should outline in the Judgment/Divorce Decree that the survivor benefit and you as beneficiary are irrevocable (which is the case in 99% of ERISA defined benefit plans) so that you have that clearly defined in a court order. A QDRO is only needed to divide the payment while the participant is alive, so you do not need a QDRO to secure the irrevocable survivor benefit...but if you are worried than you can put a simple QDRO together that lists the plan name, your names and addresses and that your former husband is awarded 100% of the benefit while he is alive, and should he predecease you, you get the 75% J&S as irrevocably elected at retirement. That should do it.

LadyjaneM10, it sounds like are referencing both the BP 401k and a BP defined benefit plan (thus the segment rates in your last post outlining the possible partial lump sum with residual monthly pension). These are two separate and distinct types of retirement accounts for which Fidelity handles the QDRO administration. I agree with Mr. Bailey in that you need to have your attorney help you on this. If your share of the 401k was cashed out by your ex then it is possible to increase your award from the defined benefit plan (if that is the only asset left), such that you get your share of the pension plus your share of the cashed out 401k all from the defined benefit (provided there is a sufficient accrued benefit under the defined benefit plan to satisfy this actuarial adjustment).

Some states have statutes that permit a court order to address marital financial concerns in an intact marriage...so through that applicable statute and a private judge I've seen In Marriage QDROs in the past...and I do not believe ERISA/IRC really prevents a QDRO with a spouse as we all know that is part of the definition of an alternate payee. These types of QDROs are not sham divorces but they are somewhat sham QDROs in my opinion. Mostly financial planners and estate planners are using them and of all the QDRO attorneys I know in multiple states, not one is preparing In Marriage QDROs. Personally I would stay clear as a QDRO drafter but it's interesting to see the plan side of things. I do not believe a plan can look behind the curtain if the order otherwise qualifies as a QDRO issued by a state court.

check Fidelity's website for help in generating the 401k QDRO: https://nb.fidelity.com/public/QDROFormGen/home#/qdro/main/home

I definitely agree with David Rigby. Maybe contact https://qdropartners.com/ who are located in Ohio.

What about the child being named not as P's beneficiary or as the child of P/AP in a child support QDRO (which is something totally different), but rather as a "successor alternate payee" (also called a "contingent alternate payee") to the deceased alternate payee?

I have never seen a state court order control an ERISA plan. Often times judges order divisions which cannot be enforced...so I'm the lucky one to say the parties must return to the negotiating table because the plan will reject the attempted QDRO. Also, unlike fmsinc above, I have drafted 100s of DROs on unfunded deferred compensation plans and feel like more times than not the company will permit the DRO. Some companies have changed their tune on permitting DROs such as EY, Chevron, etc. The biggest surprise I feel with divorcing clients and their family law attorneys is their expectation that the AP can rollover their NQ benefit to an IRA or qualified account..which of course cannot happen if coming from an unfunded non-qualified DCP via DRO. Going back to Peter's original question, I think it's a matter of the company permitting (or not) a DRO on the NQ unfunded benefit, not that they have removed any QDRO provisions as those do not exist in a NQ plan. Another wrinkle in all of this is how companies like EY and Deloitte have NQ plans that shift the company liability from the NQ to a qualified plan over time (such as a cash balance pension with an accrual rate much higher than normal to provide more funding of the overall benefit from a qualified source vs the nonqualified benefit).

Late to the party on this one...Jack, your original post makes me think you may have a public retirement plan? If yes then we often see a public retirement plan not permit a separate interest DRO which then requires a shared interest DRO plus post-retirement survivor benefit election. In those situations the former spouse typically pays for the survivor benefit election (in CA anyway) so that their awarded benefit will continue for their lifetime should the participant/member die first. If this is for a private plan covered under ERISA, you would want to use a "separate interest" QDRO as mentioned previously in this thread and then you do not need to worry about survivor benefits.

HI Chgo Mom, I am a court qualified expert in Cook County in the actuarial valuation of retirement benefits and I often work on QILDRO issues. Illinois statute prevents any former spouse from having a survivor benefit unless previously elected at retirement (and that's only for ERISA plans for which the City of Chicago is not). So remarriage would not prevent you from sharing in the monthly pension while you and your former husband are both alive, but if you die first your interest stops pursuant to Illinois law, and if he dies first your interest stops as you are not permitted to have or share in any survivor benefit payment. This is very different than in other states like California, but it's how Illinois works. As referenced by fmsinc above, some plans like FERS/CSRS say if a former spouse remarries prior to 55 then there is no survivor benefit available...but City of Chicago is not a federal plan obviously and therefore not afforded a survivor benefit. Hope that helps.

I agree that the remedy is with the state/tribal court and if said court issued an amended QDRO to vacate the prior QDRO and restore participant's benefit to the full undivided amount then the plan would be able to work with that. Agree the plan cannot look past the QDRO itself, and in simple terms, if the order is a Domestic Relations Order issued by a state/tribal court and such DRO rises to the level of a QDRO then it's a QDRO. I draft amended QDROs to vacate a prior QDRO often and so far it has never been as a result of attempted fraud on behalf of the participant. Great reason why in CA the QDRO must be a stipulation first and only after the court approves a Request For Order (RFO) would they permit a QDRO to be entered without all parties signature.

The only thing I would add is that a retirement plan can be set up to not allow rollovers from other plans. Rare for sure but I've seen it! I would be surprised if wife set up her separate retirement plan to not allow rollovers but she should check the fine print just to be safe.

Hi David, in CA the AP's award is their property and when dividing a non-ERISA plan (such as FERS/CSRS, CalPERS, etc) we always say if the AP predeceases P and before benefits have begun, AP's interest goes to their beneficiary or estate. In ERISA plans we almost always have to have AP's interest revert back to P, but CA does not say that is a gift or AP's interest is terminated upon their death. But this reversion of AP's award back to P in an ERISA plan has a value that can be calculated and to offset that reversionary value we award AP 100% of the community interest in the pre-retirement survivor annuity (QPSA). Actuarially speaking these are usually pretty close in value when P/AP are of similar age and a 50% QPSA offered by the plan.

Thank you Peter for the correction! After reading the ESA section of H.R. 2617 it would seem that if the ESA is part of the retirement plan offered by the employer then it would be subject to division by QDRO. I definitely need to research this more and thank you for posting this question!

Hi all, the 117th Congress bill H.R. 1450 includes a provision which says an employer sponsored emergency savings account falls under the same IRC section as does Health Savings Accounts (IRC 223(f)(7) relating to transfer of account incident to divorce). This is similar to IRC 408(d)(6) for IRAs but applies to HSA and apparently emergency savings accounts. So no QDRO is needed but a Judgment of Dissolution/Divorce or any other DRO incident to divorce seems like it would cover the emergency account. I know Fidelity will allow an HSA to be split under 223(f)(7) but many other administrators will not...at least that has been my experience over the years. Happy New Year everyone!