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Failure to Administer QDRO


Guest jac

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I hope for some of your thoughts on this fact-intensive situation. Thanks in advance!

Plan approves a draft DRO 15 years ago. Plan doesn't receive a signed order, sends a letter to the parties approximately one year after the draft is approved notifying them the Plan has not received a signed order. Parties do not respond. About 10 years later the participant applies for benefits in a form different than would be required by the order (if signed by the court). Participant begins benefits. Four years later the alternate payee writes the Plan asking about her benefits. She faxes a copy of the signed order (which has a date 14 years earlier). This is the first time the Plan received the signed order. Is it up to the alternate payee to pursue from the participant benefits she should have been receiving since he began his pension four years ago? What responsibility, if any, does the plan have now beyond paying the alternate payee her share of the benefit? And what about the fact that the participant elected a form of payment different from the one required by the QDRO (which was a signed before he began benefits but not received by the plan until after he began benefits)? Thanks!

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Uh oh!

From facts given, the Plan Administrator "approved" a draft. What does this mean? Conditional on receipt of a signed copy? Was such "approval" communicated to the parties? If so, was it clear that some action was now required?

More learned members of these message boards will probably express concern that the PA may have acted in conflict with its own administrative procedures, and even with information that was communicated to the parties.

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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Unless the communication 15 years ago had a very strong written disclaimer that the "approval" had no effect on the participant's rights and created no rights in the former spouse, the plan might as well hire a lawyer now before doing anything to make the situation worse.

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I suppose the lawyer idea is a good one. But if the plan approved the draft DRO as acceptable and didn't communicate that the real DRO had to show up within a specific period of time, I would bet the lawyer would counsel something like the following:

1) Pay the alternate payee as per the QDRO

2) Reduce the payments to the participant to recover the overpayments. The Plan Administrator might endeavor to make this adjustment in as painless a method as possible. Maybe reducing the life annuity to reflect the overdistributions? If that isn't fast enough for the Plan Administrator, certainly no greater than a 50% reduction until paid back.

You might want to give the Participant notice of what is intended and let them register any complaint they have in a given window. You might want to have the lawyer hired by the plan write the letters to the participant on behalf of the plan.

Does anybody see any problem with the above advice, assuming the facts are as given, of course?

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The problem with any answer in in this situation is that all the facts and circumstances can't be considered and it would be foolish to try to make a decision based on responses to this message board. Perhaps one might ask a a very specific question that has a right or wrong answer and actually get the answer here. But one should not be seduced or comforted that this board is a cheap and quick source to solve problems. This is a situation where the responses have very little value except to identify some aspects of the situation for consideration. The best we can do is give someone the perspective to realize that expert help is probably necessary.

That said, Mike Preston's suggestion is probably a top consideration as a direction to explore, but that is all I would be willing to venture.

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Thank you for your thoughts. It's helpful to have some input, but, of course, I would not rely on the board's responses for a final answer.

The 15 year old letter sent to the parties and lawyer who drafted the order clearly stated that the order would only be qualified if it was entered by a court.

We are continuing to look for the best solution. Thanks again for the input.

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Guest micheleca

:angry: My divorce decree was issued 3 years ago, including a QDRO requirement. I agreed to have my ex's lawyer prepare and submit the QDRO for both of us. It was submitted, but rejected due to incomplete and inaccurate format. The decree states that 75% of the balance will be transferred to myself. Since 3 years have past, what are my legal rights? Can my ex withdraw the funds without consent? I need some guidance!

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You need a lawyer.

If you agreed to have your ex's lawyer draw up the QDRO and it hasn't been completed, shouldn't you contact that lawyer and ask what his or her plan of attack is?

At the same time, you might want to contact the plan and ask them whether they are intending to wait for a QDRO before allowing any distributions, or, because it has been so long since the original DRO was rejected, it no longer forces the plan to put a hold on your ex's accounts.

Have I mentioned you need a lawyer?

If the plan says that the original DRO has put the plan in a position of not allowing a distribution until a QDRO comes through, ask for confirmation in writing.

If the plan won't give it to you in writing, or if they say that there is no hold, give the lawyer very little time (if any at all) to draft a letter to the plan saying, in effect, that a DRO is pending and that the plan should take no action before receiving the DRO. If the lawyer won't do it, you do it.

And each and every step mentioned in this post which refers to "you" can, and perhaps should, be done by a lawyer you hire.

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Guest micheleca

The lawyer stated that she required a accountant to determine the amount to be split. She wanted another $500 to hire this accountant, neither myself nor my ex felt we should pay additional money since her fee was a 'flat fee'. She has since sent a letter withdrawing from the case because of our refusal to pay. This has been an ongoing battle. Since the time of the decree to this date, am I entitled to interest or gains in the plan? The Plan administrator has also sent a memo stating that the defined period for receipt of the QDRO has passed and they no longer have a hold on the account. I know I need another Lawyer, but I also need some basic guidance before I fall into another mess with yet another lawyer!

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Micheleca:

Your attorney should not need an accountant to divide the account balance (assuming that it is a Section 401(k) or similar type of plan). Typically, the order will say that the ex-spouse receives 50% of the benefit under the plan on the date of separation. The plan will tell you what that amount is.

Whether the payment to you will be adjusted for investment return will depend on what the order says (which apparently hasn't been drafted yet). Remember that it is very possible that their has been a negative return on the account, so that you will receive a smaller payment if it is adjusted to reflect the investment return actually earned.

You should ask the plan if they have a sample document. Many plans have a model order that you can use. If you don't make any material modifications to their form, then they will typically approve your order.

The most important thing to do is to notify the plan that you are seeking an order, so that they don't pay out the entire benefit to your ex-spouse.

The next most important thing you should do is to hire an attorney.

Kirk Maldonado

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Absolutely. And if the attorney you interview does not immediately know the importance of a QDRO, then keep looking.

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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Guest micheleca

Thanks to all who have responded. I have been asking my ex for a copy of the latest statement, which he refuses to provide. If in fact he has withdrawn all the funds--what is my recourse?

My previous attorney states an accountant is needed because the policy does not allow for the plan to accept a qdro that requires calculations of accurals prior to 7-1-1998. (date of separation was 3-97). There must be an easier way to resolve this--any ideas? (If there is any money left in the account to split at this point!)

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As a preliminary step, you might consider sending your divorce agreement to the plan as a DRO and ask them whether it satisfies their definition of a QDRO. If your settlement agreement is rather specific as to the name of the plan and how the benefits are to be divided, the plan just might accept it. At the least, it will put them on notice that something is being done (again). This is truly a shot in the dark, though, because it is most unusual for a marital settlement agreement to be drafted in a way that satisfies the QDRO rules.

Or, you can take a look at the previously submitted DRO that was rejected and see what the reasons for rejection were. See if those reasons can be cured simply (something tells me they can't, though). If they can, submit another version modified to address those concerns.

It can't be stressed enough though that what you should be doing is getting yourself lined up with a lawyer that can advise YOU on your options.

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The only way to be sure that you have protected yourself from the risk that your former spouse will receive money from the plan pending recognition of your interest under a qualified domestic relations order is to submit to the plan a domestic relations order that mentions your interest under the plan.

The divorce decree is a domestic relations order and it sounds like it mentions splitting the plan account. While the plan is determining whether or not the order is qualified, it is required to hold back the amount that would go to you if the order turns out to be qualfied. According to at least one federal court decision (but not a literal reading of the statute) even if the plan determines that the order is not qualified, it should continue to protect you for a reasonable time in order to allow you to correct qualification defects. Three years is not a reasonable time, so you should stay on track with submission of another order to prolong protection.

You should ask the plan for a copy of its written procedures on qualified domestic relations orders. Those procedures should state what is necessary to know for an experienced person to draft a good order. However, if the plan even has written procedures, they probably suck. For example, the procedures should explain that it has a cut off of July 1998 for calculation of account changes (probably a change in plan administrators).

You can probably get account balance statements from the plan from before 1998. From the statements, you can calculate a good approximation of what you are after. You may need a subpoena or other legal process to get the account information if your former spouse will not consent to release of it. It may also be possible to describe what you should get without reference to the account balance numbers.

Unfortunately, I doubt that you will be able to carry through with this mess without competent and experienced legal help. Yours is no longer a garden variety situation and most divorce lawyers barely get by in the most simple of these matters.

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Guest micheleca

I have an appt with an attorney on Monday, at which time I will determine if this is the appropriate attorney to assist me. What are my options if in fact my ex has withdrawn all funds from the account? :unsure:

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If your ex-spouse has violated the Marital Settlement Agreement (MSA), your attorney will be able to tell you what, if anything, you can do. Generally speaking, the pension isn't terribly different from any other asset. If he violated the MSA your attorney will go about trying to make you whole (or tell you why state law gets in the way of you being made whole).

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Guest micheleca

Thanks again to all who have offered their insights, I find myself in quite a mess!

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