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Long overdue QDRO


Guest DDDlump

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Guest DDDlump

A couple divorced over thirty years ago and never addressed the husband's 401(k) balance in the community settlement. The ex-spouse is now requesting her portion of the 401(k). What should be done? Is there any statue of limitations or what would have been the law addressing divorces at that time.

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Wow. Was there really a 401(k) balance thirty years ago?

Non-lawyer comments:

- whether or not a court will re-open a settlement is probably governed by state law and precedent, and maybe by significance of the claim.

- since there was no such thing as a QDRO prior to 1984, the court might be willing to look at it.

- the terms of the divorce settlement might already (indirectly) address the issue. This might be relevant in determining whether the court wants to re-open.

This assumes the plan in question is not sponsored by a governmental unit.

There have been many discussion threads related to QDROs. You might try the search feature for more info.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Without some court or agency document that provides for the former spouse to have a a legal interest in the plan, the former spouse gets nothing. If the court or agency document that provides an interest to the former spouse is from before January 1, 1985, the Retirement Equity Act allows the plan to give it effect under the QDRO rules even though it does not meet all of the formal QDRO requirements (good luck with interpretation!). If the document is after 1984, it must be a QDRO to give the former spouse anything. If it is a domestic relations order, but not qualified, the former spouse has a reasonable time to get the order qualified, but must observe the 18 month rule of section 414(p)(7)(B) and (E).

Since "they never addressed" the 401(k) balance, it sounds like the former spouse has no interest, perhaps unless community property law applies.

Whether or not a state court will consider doing anything with any situation that old is a matter of state law and the plan administrator should not care or get involved with what happens in the state court.

There are other threads, including one that provides the cite to the Retirment Equity Act.

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DDD: Who is the spouse requesting the distribution from? The employer, plan, employee? Was the benefit issue addressed in divorce decree? How is the spouse attempting to enforce the right to the benefit? If the plan is subject to ERISA then Qdro is right -Plan does not have to honor any order or decree regarding benefit rights. Spouse must reopen divorce to get order which can be enforce as QDRO which may not be possible since S/l may have expired or ct did not retain jursidiction over benefits after divorce became final. Does H reside in same state as when divorce was issued? Has H remarried since divorce? If so the spouse may be out of luck. Finally Kirk is correct. 401(k) plans were first made available under the Tax act of 1978 and employers did not become aware of pre tax employee contribution provision until 1980.

mjb

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Guest b2kates

The divorce predates the adoption of REA, which created QDROs.

Prior to that time there is a strong history of cases that says the spouse has no right in the pension due to the anti alienation rules of ERISA.

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It is possible that, when he takes a distribution from his plan (apparently a DC plan), then the money resides in his personal account(s). Perhaps that will automatically generate payment to her. Let's not forget to read the document.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Pax: If the participant's interest in the plan was not addressed in the divorce I dont see how the spouse can have any claim now because the divorce decree is a final judgment of all property rights unless the court reserved jurisdiction over a division of the pension rights at a future date. There may also be a S/l which bars the spouse from seeing to enforce any claim 30 years after the divorce decree. We still do not know who the claim has been made to or its basis.

mjb

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I am certainly no expert, but is it not possible that a divorce award would give her X% of his income, including retirment income, and all of that would be part of alimony? If alimony, he would deduct it and she pays the tax.

Is this plausible?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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I dont think that retirement benefits can be deducted as alimony on a pre tax basis because retirement benefits are subject to the assignment of interest rule which taxes the employee who earned the retirement benefit not the recipient. The employee could only deduct the after tax portion of the retirement benefits he receives as alimony. Retirement benefits paid under a QDRO are taxed to the former spouse and not the employee. Until a recent change in IRS rules, nonqualified deferred comp was taxed to the employee even if the benefits were paid to the spouse under a divorce decree.

mjb

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