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What is the extent of an employer's obligation to furnish account information to a participant/alternate payee who is preparing a QDRO?


Guest Sparky

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My question is this: What is the extent of an employer's obligation to furnish information about a participant's account balance to a participant or an alternate payee who is preparing a QDRO? Specifically, is it sufficient to merely give the participant or alternate payee the current account balance (vested and non-vested amounts, as well as loan information), or does the employer have to go back and attempt to determine the participant's account balance as of a particular point in time in the past (e.g., December 31, 1992?)

The DoL QDRO Publication only mentions that an administrator must furnish a statement of the participant's benefit entitlements, or indivdual benefit and account statements.

The only record retention requirement that I could think of is ERISA Sec. 209. What records must an employer retain under this requirement--the participant's accrued benefit, or the contribution history?

Any thoughts would be appreciated--thank you in advance.

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The plan has to do what is reasonable. What is reasonable depends on the circumstances.

You might also consider how the new DOL position on charging for QDRO work might fit into the scheme.

By the way, the "employer" does not do anything with plan records or data. The plan administrator or some other fiduciary has that function.

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Thank you very much for your reply.

With respect to ERISA Sec. 209, however, I do think that Sec. 209(a)(1) does impose the records requirement on the employer.

Thanks again.

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Thanks for the observation.

But what does that mean? At the extreme, that would make the employer responsible for keeping essentially all of the plan records because almost any fact could have a bearing on a participant's benefits. Among the data would be investment returns, testing and actuarial calculations. A few things could be excluded, such as records of proxy voting. And what about beneficiary designations? A beneficiary designation does not determine benefits to an "employee."

Or does it mean that the employer has to keep only employment related information such as dates of hire and termination, data from which hours of service can be calculated, pay and pay deduction elections?

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Section 107 of ERISA requres that plan sponsors maintain records for which disclosure is required for not less than 6 yrs. This would include providng a statement of a participant's accrued benefits once a year which is required under Section 105. I dont know of any requirement to keep records of account balances for prior years if the participant does not request a statement. Separately the IRS requires that each participant's account be valued at least once a year. I assume that the employer must keep the records for three years but I have never reviewed whether this is consdered a record for tax return purposes, e.g., payroll tax returns must be kept for 4 years. In the absence of any of the above requirements the plan sponsor has no responsibility to keep plan records for any other reason other than protection from claims from a employee, e.g., hours of service records in event employee makes claim of benefit eligibility. Bene designation forms and spousal waivers should be kept as a permanent record to avoid uncertainty of payee when the participant dies. But bene forms can be disposed of when participants cash out. Spousal waiver should be kept as permaent record in case ther is a claim of fraud at a later date. Also DB and MP plan should keep permaent record of ee and spouse birth certificates, benefit election and marriage certificate to protect against later claim by another spouse.

mjb

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Guest ptpnthr

I have a variation on the question. Many plans say the position of the DOL is wrong. Those plans require the participant to give his or her consent to the disclosure to the potential AP or require the potential AP to get a court order.

Does anyone know what the plans are thinking in that regard when they refuse to disclose anything to the potential AP without the participant's consent or a court order? Does it make any difference whether or not the participant and alternate payee lived in a community property state while the benefit accrued?

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I seem to recall that there was a DOL Advisor Opinion on a topic like this a number of years ago. It may or may not be on point, I just don't recall.

But I'm pretty sure that it addressed some privacy concerns relating to the disclosure of the amount of a participant's benefit to someone other than the participant.

Kirk Maldonado

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In most divorce proceedings both parties are required to to provide financial disclosure on all their assets and the Ct can order the employee to give permission to allow the AP accees to information regarding plan benefits. Getting access is not a problem; finding the requested information is.

mjb

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On the general topic of what records must be retained by an employer or plan administrator, see Rev. Proc. 98-25 (and also IRS Notice 99-1, Law and Analysis, fourth paragraph).

More specifically regarding the initial post, the QDRO Answer Book (by Panel Publishing, part of Aspen Publishing) has a discussion on the topic that is worth checking out. The short answer is that it's unclear.

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I must make a retraction of my prior posting. Based upon my research, the DOL has stated that the information must be provided to the (soon to be former) spouse. The following is from the DOL publication entitled QDROs...The Division of Pensions Through Qualified Domestic Relations Orders (whioch is available on the DOL website):

2-1: What information is an administrator required to provide a prospective alternate payee before the administrator receives a domestic relations order?

Congress conditioned an alternate payee's right to an assignment of a participant's pension benefit on the prospective alternate payee's obtaining a domestic relations order that satisfies specific informational and other requirements. It is the view of the department that Congress therefore intended prospective alternate payees -- spouses, former spouses, children, and other dependents of a participant who are involved in a domestic relations proceedings -- to have access to plan and participant benefit information sufficient to prepare a QDRO. Such information might include the summary plan description, relevant plan documents, and a statement of the participant's benefit entitlements.

The department believes that Congress did not intend to require prospective alternate payees to submit a domestic relations order to the plan as a prerequisite to establishing the prospective alternate payee's rights to information in connection with a domestic relations proceeding. However, it is the view of the department that a plan administrator may condition disclosure of such information on a prospective alternate payee's providing information sufficient to reasonably establish that the disclosure request is being made in connection with a domestic relations proceeding.

Kirk Maldonado

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In the vast majority of cases, the alternate payee merely has the plan participant (or the alternate payee's attorney communicates to the participant's attorney and the participan't attorney) communicates to the plan that the plan may provide information that is requested. If the participant doesn't so authorize in some way shape or form, then the DOL rule would seem to apply. But it almost never gets to that. At least not in my experience.

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Until we have some authority that protects plan fiduciaries who disclose, I am willing to flout the DOL infomal position. If the DOL has the courage of its convictions, it can issue a regulation rather than legislate by pamphlet. The DOL has a few queer and unconsiderd notions about QDROs, probably born out of a skewed sample space. I think the DOL mostly sees alternate payees (via complaint and request for assistance) and sees them in the context of plans that are misbehaving. That creates a bias and some blind spots.

State law provides ample opportunity for an alternate payee to compel the participant to consent to the disclosure or to otherwise compel the plan to disclose. All it takes is a simple subpoena and the plan administrator is off the hook.

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I have difficulty in relying on DOL opinions and pronouncements on the applicaton of ERISA which are not supported by statutory or regulatory authority (remember the recently revoked DOL opinion forbidding charges for QDROS which did not have a citation for its conclusion that was issued during the previous administration). In the real world the divorce bar ignores the DOL opinion because it is easier to get the employee's consent for release of plan information on the same terms as other financial records or have the ct order the participant to give consent to releasing the records to avoid wasting time. One could draw an inference that the DOL has an inherent bias in favor of the claims of APs in QDRO matters.

mjb

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Guest Kevin Wiggins

QDROphile and Mr. Preston:

Have you ever tried to get a subpoena in a nasty divorce case? It is not "simple" and can be downright expensive, often more than the benefits to be awarded in the QDRO. In some cases the AP has to file an entirely new law suit, which requires the AP to hire an attorney (cha ching) to prepare the motion (cha ching), file the motion (cha ching), pay the filing fee (cha ching), serve the opposing party (cha ching), set a court hearing (cha ching), hold the hearing (cha ching cha ching) and, if the AP is lucky, get an order (previously prepared by the attorney (cha ching)) based on that hearing alone. Of course, no good family law attorney who desires to oppose it will let the AP get a result on that one hearing (cha ching, cha ching, cha ching, badaboom badabing.)

In a case in which it is "easy," this is not an issue. It is only an issue when the participants, male or female, refuse to cooperate and hire bulldog divorce attorneys to do everything they can to stop the AP from getting anything.

The DOL's position is not unreasonable (though I agree they should not legislate by pamphlet), particularly given fiduciary duties of disclosure (remember the colorable claim doctrine). In community property states, that money BELONGS to the AP, even prior to the QDRO. The QDRO is merely the mechanism for enforcing the AP's right to the money, that is, the mechanism for avoiding ERISA preemption.

What is the plan's basis for refusing to disclose the information to the AP, particularly to an AP in a community property state?

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QDROphile and Mr. Preston:

Have you ever tried to get a subpoena in a nasty divorce case?  It is not "simple" and can be downright expensive, often more than the benefits to be awarded in the QDRO.  In some cases the AP has to file an entirely new law suit, which requires the AP to hire an attorney (cha ching) to prepare the motion (cha ching), file the motion (cha ching), pay the filing fee (cha ching), serve the opposing party (cha ching), set a court hearing (cha ching), hold the hearing (cha ching cha ching) and, if the AP is lucky, get an order (previously prepared by the attorney (cha ching))based on that hearing alone.  Of course, no good family law attorney who desires to oppose it will let the AP get a result on that one hearing (cha ching, cha ching, cha ching, badaboom badabing.)

Look, he's givin' out wings!

...but then again, What Do I Know?

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Kevin - would you give Participant balance information to any spouse, especially in a community property state? Can your spouse, if any, call up a plan and get your account balance?

Re-reading the DOL suggestion, it does say to give information to "prospective alternate payees -- spouses, former spouses, children, and other dependents of a participant who are involved in a domestic relations proceedings."

So, if you have proof that a close relative of the Participant was actually involved in a domestic relations court proceeding, I would guess it is OK to provide some account information.

But it is always best to get written permission from the Participant before releasing data.

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Kevin,

I only stated that it was easy in the vast majority of cases. Not that it was easy in all of them. And I have no good response to the hypothetical you laid out. The "system" isn't perfect, that's for sure. But I think it is what it is. And if the AP needs to go through all of that to merely get a subpoena sent to the Plan Administrator, then that is the fault of the divorce system, not the fault of the Plan Administrator. There's always legal aid for somebody who merely wants to get info from a plan, I guess.

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Guest Kevin Wiggins

There is obviously no clear guidance on this, but arguably the plan has a fiduciary duty to provide the information to a prospective alternate payee that provides the plan with reasonably sufficient evidence that the request is made in connection with a domestic relations proceeding, even without a participant's consent or court order, and whether or not it is a community property state. No one has yet pointed to any basis to support the plan's refusal to provide the information. There is breach of fiduciary duty to the participant, but plans must always balance fiduciary duties to the participants and alternate payees. There may be other support - such as Gramm Leach - but I'm not aware of any.

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Well, count me amongst those who think that "evidence" of a domestic relations proceeding is fairly simple to prove. But a letter or phone call from the AP or AP's attorney doesn't meet the threshold. I know it is difficult for a lay-person to navigate these waters and I'm truly sympathetic to such an AP's plight.

I am still not convinced that the Plan Administrator can bypass state domestic relations laws.

One way to deal with this, if the participant is truly being non-cooperative, is for the AP's attorney to merely include reference in the marital settlement agreement to the fact that a QDRO will be provided later which will divide the community interest equally. Once the MSA is approved by the court, a copy of same to the Plan Administrator should meet the threshold you are setting. I've seen this done many a time.

Once a copy of such an MSA is delivered, if I were the Plan Administrator, I'd respond to such a request for information with a letter to the Participant indicating that a request for information had been presented by X (the AP) and that as Plan Administrator the information requested is going to be forwarded to the requesting party unless the Participant refuses to give permission to do so. I would also indicate that a failure to respond to this letter would be taken as approval to release the information.

The problem comes about if the Participant then responds in the negative.

I don't know what I'd do at that point. Probably engage an attorney to see what the appropriate next step is. But I wouldn't fault a Plan Administrator for sending a letter back to the AP (or AP's attorney) indicating that the information is unavailable in the absence of permission from the participant unless served with a subpoena of some sort.

But in my experience it never gets this far. A simple letter from the AP's attorney to the participant's attorney asking for the participant to sign a request to the Plan Administrator for information is almost always signed and forwarded immediately.

Something tells me that domestic relations laws subject a participant that does not voluntarily sign such a statement to a whole hose of negative consequences and that the AP's attorney would be able to enumerate them.

Much as I'd like to help such an AP, a letter from the AP or the AP's attorney is just not enough even with the informal opinion of the DOL previously cited.

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In the states that I am familiar with there is no problem in getting the participant to give permission since the participant is a party to the action and can be ordered to give consent to the PA to provide info to the AP or spend some time in jail for contempt of ct. In cases where the QDRO is issued after divorce, the Ct retains jurisdiction over the parties to insure compliance. The problems occur when the AP delays the preparation of the QDRO for several years after the divorce and then goes to the PA directly to collect the benefits. The requirement to disclose information on plan benefits is no different than disclosure of other assets, e.g. brokerage accounts, off shore bank accounts, business interests,etc. since the ct will order the partiies to provide financial information to the other side.

mjb

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Guest Kevin Wiggins

But the requirement is clearly different unless you argue the PA has no ERISA fiduciary duty to a prospective AP. You are correct that the issue is more pronounced if the AP whishes to obtain a QDRO in an old case, but "old" means 30 days, at least in Texas. I imagine it would be quite difficult under the MSA procedure that you propose for the AP to send the MSA to the PA, get a response with the benefits information, and get a motion for a QDRO filed, all in 30 days. It is possible, for large plans it could be difficult.

It just seems to me if the AP's attorney mails or faxes a power of attorney signed by the AP, whom the plan knows is the participant's spouse, gives the plan a case name and number and identifies the court where the case is filed, the PA would be protected - particularly in light of the DOL's guidance (or, if you prefer, the DOL's legislation by pamphlet). If the plan wants more protection, the plan could ask for a file-stamped copy of the first page of the petition or, if the plan really wants

to be protected, a copy of the entire petition. In many cases, particularly where the participant is disagreeable, that would be not only much easier, but also much cheaper than going to a hearing to get a subpoena. Sometimes it can take two or three scheduled hearings just to get the court to sign anything, and that is when the other side is being cooperative. Every time the attorney has to show up at the court house, somewhere angels are getting new wings.

Anyway, this is all hypothetical at this point.

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