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Participant's atty. has requested a form QDRO from the plan. The plan has no form QDRO available, however, was considering responding with a checklist of the technical requirements of a QDRO for the participant's atty. to consult when drafting the dro. Any problems with that approach?

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Sounds like the attorney might be asking the plan to do his job. You could refer him to http://www.dol.gov/ebsa/publications/qdros.html

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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Provide the lawyer with a copy of the plan's written QDRO procedures. Good QDRO procedures will cover all the requirements and serve as a guide for drafting an order. Don't be embarrassed by lack of a "form" order. Plans really shouldn't have them, though they are popular. The plan does not owe anyone any technical assistance in drafting orders and can actually incur liability if it venures too far. The reference given by pax is appropriate.

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QDROphile,

I'm interested in your thoughts on form QDROs.

You wrote, "Plans really shouldn't have them, though they are popular. The plan does not owe anyone any technical assistance in drafting orders and can actually incur liability if it venures too far."

Can you say more about why you think Plans shouldn't have form QDROs?

Thanks.

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Preparation or acceptance of a form is a fiduciary function. The fiduciary cannot be partial to a particiapnt or an alternate payee. It is impossible to prepare a form that is neutral, at least for a defined benefit plan. One way or another, the form will at least suggest to one or the other some idea or advantage that would not have been thought of without the inspiration provided by the form. For example, would the form have a provision for awarding the alternate payee a portion of the survving spouse benefit if the participant dies before the start of benefit payments to the alternate payee? Would the form provide for a proportionate share of early retirement subsidy to the alternate payee in the event that the participant starts benefits later and is entitled to a subsidy? The alternate payee may not have bargained for those benefits unless the form had raised the issues, and any success on the part of the alternate payee could be detrimental to the participant. The other side of the coin is that the plan administrator cannot possibly put everthing in a model that a QDRO can do, such as secure child support obligations or allow partial cashouts of employee contributions in defined benefit plans. Is the administrator at fault for an "incomplete" model or implied limitations? Even worse, the form may be used rather thoughtlessly and may greatly influence the property division. You know darn well that many ignorant lawyers desperately want to fill in the blanks and be done with it rather than give much thought to how the property should be divided. I don't like giving them a loaded gun. In a similar vein, criticism has been leveled against lawers who thoughtlessly influence clients to pass property in a will according to common law presumptions rather than find out what the client really wants in a will.

The counter argument is that no one should be shy about having everyone fully informed and making their own decisions and doing their own bargaining. In a perfect Republican world, that would be true, but it does not happen that way. The sophisticated provisions in QDROs are not understood by all the lawyers, let alone the participant and alternate payee.

Another problem is that domestic relations orders are creatures of state law. They must comply with state law and court form and procedures. The plan administrator would at least have to put a big disclaimer on the form that the form is not designed to cover any requirements of state law. For example, it is common practice to have a provisions for reservation of jurisdiction over the property division that would otherwise end upon the divorce. But that is purely a state law concern and the plan administrator is out of place by adding it to the form. Or could the plan administrator be criticized for not adding it? What if the availability of the form sugggested to the individuals that they they could do it themselves without legal counsel? Would the plan administrator have any problem other than dealing with the mess? Would the plan administrator give the form only to lawyers? How detailed will the form be? Will there be alternate provisons for the formulas that are commonly found in community property states? And how does the plan administrator know about all that?

The law tends to treat volunteers rather rudely. I am not in favor of the plan administrator volunteering a form of domestic relations order, but many people will conclude that the convenience, control and expediency of a form outweighs my theoretical concens. There is something to be said for that. The conclusions might need to be reevaluated now that the DOL has changed its position against charging the participants benefits for the costs of QDRO administration.

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QDROphile, thank you for your thoughtful and thought-provoking response. There is a lot to think about in there. I often have puzzled over how Plans remain neutral regarding the division of pension benefits. While it may be true that the Plan doesn't or shouldn't care how the benefits are distributed, I agree that it could be argued that when model QDROs offer options that are seemingly beneficial to the participant or alternate payee that someone could argue that the Plan is not maintaining its neutrality. Even without a model QDRO the Plan still faces this problem whenever it responds to orders and addresses the deficiencies in the orders. I am continually amazed (and dismayed) at the number of QDROs we see that have been prepared without regard to the type of Plan--orders directed to defined contribution plans when the Plan is a defined benefit plan. A lot here to mull over.

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