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Division of benefits as of 1998 for a profit sharing plan


Guest inquiry2

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Guest inquiry2

Divorce decree states W gets 50% of H's profit sharing upon retirement from, or termination of employment from plan. H's company is acquired by another company in 2004 thereby "terminating" his employment under the plan.

The marital share for calculating the 50% of pension is from 1987 to 1999 (they divorced in 1999).

What issues if a QDRO is now drafted asking for 50% of profit sharing plan as of 1999 plus any losses or gains since then?

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H's company is acquired by another company in 2004 thereby "terminating" his employment under the plan.

What does this mean? He is not employed "under a plan". Just because the employer is acquired, that does not mean anything changes with respect to the plan.

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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What issues if a QDRO is now drafted asking for 50% of profit sharing plan as of 1999 plus any losses or gains since then?

One major issue is that there is a good chance the TPA firm recordkeeping the plan will be unable to calcuate the gains/losses because it is going back to 1999!!!! Big administrative burden!!!! Also, some firms will not "qualify" a DRO with earnings calculations back to 1999.

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...some firms will not "qualify" a DRO with earnings calculations back to 1999.

I don't know what this means, but I hope it does not refer to the TPA deciding whether a DRO is qualified.

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 don't know what this means, but I hope it does not refer to the TPA deciding whether a DRO is qualified.

Sure does.....or an attorney approving them, or the Plan Sponsor, why??

I was just at a conference where "QDRO" experts presented information about approving DROs. They indicated that if you have a "compliance manual", that outlines exactly how you approve DROs, and that "compliance manual" states that you will not accept a DRO with an effective date prior to "X" date, you can send the DRO back for rework.

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Perhaps pax meant that determination of qualification is a fiduciary responsibility, and most TPAs claim not to be fiduciaries, and the same with lawyers. Any plan sponsor that is a fiduciary for purposes of QDROs has an idiot for an advisor. If the TPA determines qualification, either the TPA becomes a fiduciary for exercising a fiduciary function or the "real" fiduciary has commited a breach by not properly discharging its duty to determine qualification. The fiduciary can take into account advice of professionals, but must ultimately make the determination.

Also, there is more to the story if the plan decides that it cannot reasonably calculate amounts before a certain date. I am sure that the experts at the conference explianed all the details correctly.

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Also, there is more to the story if the plan decides that it cannot reasonably calculate amounts before a certain date. I am sure that the experts at the conference explianed all the details correctly.

If a plan changes recordkeepers once or twice, it is very difficult to track down earnings from 5 or 6 years ago if you are the current recordkeeper. Also, certain information may be purged off of the recordkeeper's systems after a set number of years. The information can be retrieved at a very large cost, which is why a more current date should be used.

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Back to the original poster's question

What issues if a QDRO is now drafted asking for 50% of profit sharing plan as of 1999 plus any losses or gains since then?

I am saying that an issue with a QDRO drafted this way is that there is a good chance the recordkeeper will not be able to accomodate the earnings calculation, and the QDRO should not include a date from 1999 with earnings gains and losses.

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Good. To be more general, anyone who prepares a form of domestic relations order needs to understand how the plan functions, including how it computes and credits earnings. For any number of reasons it may not work if you simply specify earnings and losses from a date, especially a date some years ago, or you may get a result or methodology that is not at all what you had in mind, and you may not even know it.

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  • 2 weeks later...
Guest inquiry2

Sorry it took so long for me to respond. I'll fill in the gaps.

I represent the alternate payee (AP). AP attempted to have a QDRO drafted since 1999 through several incompetent lawyers. The participant just terminated within this past year. The divorce decree states that "The husband aggress the wife is entitled to 50% of the martial share as defined in [Virginia code reference] of the husband's pension/retirement/profit sharing paid to the husband upon retirement from, or termination of his employment with [employer]. For the purposes of this determination, the parties were married 1987-1999."

Plan is a Profit Sharing Plan & Trust. A company representative gave me the following information. The plan was formerly a part of a multiemployer plan (DB right?), and was separated from the other plans because of a "partial termination." The SPD confirms that no employee contributions exist. I have a copy of a 2002 form 5500 filing which indicates that it is a single employer plan. The company told me no other retirement plan (qualified or otherwise) exists for participant.

Assume that the employee did terminate. The company is waiting to distribute to the AP before releasing the participant's funds. No QDRO procedures exist.

What language do you suggest to capture interest/earnings/losses from 1999-2004?

How can I confirm no other plans exist?

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You represent a person trying to get a QDRO and who has failed because the person was previously represented by incompetent lawyers. And you would be what? Not a lawyer? A lawyer who is basing advice on some rather general questions asked of persons unknown to you?

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