Can a QDRO be amended or clarified?

[Dougsbpc]

DB plan receives a DRO in good order and the administrator determines it is qualified. The court orders the plan to distribute benefits to the alternate payee per the terms of the QDRO.

A mistake was made by the atty who drafted the DRO and the administrator did not catch the error.

Specifically, the order indicated that the alternate payee is awarded 50% of the participant's accrued benefit. It should have been 50% of the participant's accrued benefit earned from the time of marriage to the time of separation. The alternate payee was paid 50% of the participant's benefit through the date of separation and now wants more (i.e. 50% of the participant's benefit forever). Is there any such thing as an amended QDRO?

The participant and alternate payee have not finalized their divorce and have not fully divided joint assets yet. Perhaps I am wrong, but if joint assets are being split 50/50 couldnt the participant reduce other assets being given up by the same amount of excess plan benefits resulting from the mistaken language?

This occurred in California which is a community property state.

Thanks much for any responses.

[Guest Grabitquick]

Quick answer to whether a QDRO can be amended is "yes," and there's a recent DOL opinion letter that says so. (I never understood why the plan in question in that one thought that it needed the DOL letter in the first place, and have always felt that the court's ability to issue an amended QDRO was a given--the court giveth and the court taketh away, as long as any order it issues is a QDRO.)

Either way, the plan administrator's only duty is to follow the terms of the QDRO, if it meets the QDRO requirements. The plan's only interest should be that any order affecting it is qualified. The plan should not get involved in whether the relative amounts awarded to the parties are fair or correctly reflect state law, or whether the terms of the QDRO follow the parties' divorce judgment (or court-approved property settlement, if issued before the final judgment). Ensuring that the QDRO reflects the divorce judgment, property settlement or applicable state law is not the job of the plan or the plan administrator--it's exclusively the job of the parties and/or their respective attorneys (and the court). How the parties want to carve up remaining assets if the original QDRO was wrong and the alternate payee has been overpaid so far is the parties' problem, not the plan's.

[Kirk Maldonado]

Grabitquick:

There was a legitimate issue, based upon the wording of the statute, if you read it in excruciating detail. I seem to recall that the statute says the order must create an interest, and in the QDRO in question, the second order lowered the level of benefits to be provided. (At least, that is my recollection.)

[david rigby]

Good reading, even for those who only occassionally deal with QDROs:

http://www.dol.gov/ebsa/regs/aos/ao2004-02a.html

[Guest Grabitquick]

That's correct, Kirk. The statute says a QDRO "creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to" receive benefits. Based on this text, an order that awards nothing to an alternate payee, or expressly awards all benefits to the participant, would apparently not be a QDRO.

However, it seems like hair-splitting to assert that an order that "de-creates," so to speak, a previously-granted "creation" of the court cannot be a QDRO, thus forever precluding the parties and the state court from correcting a previous mistake or recognizing a change in the parties' community property division. The DOL seemed to focus on this in its advisory opinion, and indicated that such a position would defeat the purpose of the statute. (The amended order in that case reduced the amounts awarded to the alternate payee by the first order. It's not clear whether the subject plan, sponsored by Northwest Airlines, would have accepted an order that "created" additional benefits for the alternate payee, but presumably it would have if it otherwise met the QDRO requirements.) I guess my bewilderment about Northwest's concerns boiled down to "Why do you care?" As long as the amended order didn't result in more than 100% of the participant's benefits going to the alternate payee, it seemed like a no-brainer to me, particularly if the alternate payee stipulated to the change.

Of course, Congress could have specifically made reference to QDRO amendments in the statute, since I doubt that it thought parties should get only one bite at the apple. But, that's Congress.

Now it's time for a beer. Thinking about QDROs has that effect on me (and I suspect most of us who wrestle with them).

[Kirk Maldonado]

Grabitquick:

While other motives may have come into play, remember that complying with the terms of a court order that does not satisfy all of the applicable QDRO rules would cause the plan to be disqualified. While the risk of that having occurred to the plan are pretty small (to say the least), the most prudent thing was to seek the governmental approval of the situation, rather than risk jeopardizing the tax-qualified status of the plan. While some may say that the plan's position was overly conservative, I can't say that it is completely without merit.