QDRO issued before divorce decree?

[Guest slrogers]

We have a participate who, as the story goes, left his wife and moved to another country, leaving her with no money or support. The judge issued temporary orders giving her the ability to "liquidate" his account balance in our 401(k) Plan. I informed her that we could not distribute his account without a QDRO, which I assumed could not be issued until the divorce was final.

However, I did receive a proposed QDRO from her attorney that is based on the temporary orders that were issued. My question is - Is a QDRO that is issued prior to the final decree valid and are we obligated to comply with it? Since our participant has disappeared, he is not being represented in this matter and therefore, will not have any say in the division of the property.

[QDROphile]

Nothing in 414(p) requires a divorce. However, you might be a bit more demanding about the terms of the order to assure that the requirments of 414(p) are met. Perhaps it is sloppy, but an order within or subsequent to a divorce can be presumed to involve marital property rights without specific terms to that effect.

[david rigby]

... and don't forget to review plan provisions, especially with respect to whether a QDRO will trigger a distribution (versus merely a segregation of the account).

[mal]

I would think you would need to look to that state's domestic relation laws to ensure the court is not overstepping it's bounds. If the order is valid under the applicable state law, then you would be obligated to honor it.

[david rigby]

I would think you would need to look to that state's domestic relation laws to ensure the court is not overstepping it's bounds. If the order is valid under the applicable state law, then you would be obligated to honor it.

Can you explain to us non-lawyers what this means? I thought this is why we have QDROs and 414(p).

[QDROphile]

Plan administrators are not required to question a domestic relations order with respect to state law aspects and it would be foolhardy in almost all instances to even think about it.

[mal]

To be valid, a QDRO must be made pursuant to state domestic relations law...right? In this case where the admin is already questioning the validity of the state order it would seem foolhardy to assume the judge's actions are valid. How would you like to be the admin who thought there may be a problem but didn't send it to legal...

[QDROphile]

And why is the plan administrator questioning the validity under state domestic relations law?

I can understand that the administrator might wonder if the order is issued under state domeatic relations law, because that is a valid qualification question. For example, if the order is issued under state probate law, it cannot be a QDRO. That is why I suggeted that the administrator be more demanding and less assuming about the 414(p) requirements. If the order recites that it is issued under state domestic relations law, end of story. If it recites that is is issued under statutes that are cited in the order, maybe is should go to "legal" for confirmation that the statutes are part of the state's domestic relations law. It might even be reasonable to assume that an order that provides for support of a spouse is under domestic relations law (but watch out for probate if someone is dead). If it is issued under state domestic relations law, the administrator should have no concern for whether or not the court had the authority to fashion or approve the particular terms. Once the administrator starts on that slippery slope, where does it stop? Should the administrator be worried about due process? The plan administrator does not get to wear black robes. By the way, the DOL has issued an advisory opinion, 92-17A, that says the administrator does not have to pry into state law.

I would never argue against seeking assistance of competent legal counsel. Between the incompetence of the drafters and the deceptive appearance of simplicity of the law, most domestic realtions order need review by a lawyer.

[Kirk Maldonado]

I concur in QDROphile's remarks.

[Guest Kevin Wiggins]

Many state courts enter domestic relations orders before the divorce is final. In many cases, the so-called temporary order is the only order you get.

QDROphile is right. Not only the DOL, but the federal courts have said that ERISA prohibits a plan adminsitrator from questioning the state court's determinations of state law. Plan administrator just have no business, and no authority, to question whether an order signed by a judge is a valid court order.

[KJohnson]

From the "sham QDRO" opinion letter 93-13

http://www.dol.gov/ebsa/regs/AOs/ao1999-13a.html

You have asked for an advisory opinion as to whether, and if so when, a plan administrator may investigate or question a domestic relations order submitted for review to determine whether it is a valid “domestic relations order” under State law for purposes of section 206(d)(3)(B) of ERISA.

********

When a pension plan receives an order requiring that all or a part of the benefits payable with respect to a participant be paid to an alternate payee, the plan administrator must determine that the judgment, decree or order is a “domestic relations order” within the meaning of section 206(d)(3)(B)(ii) of ERISA — i.e., that it relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the participant and that it is made pursuant to State domestic relations law by a State authority with jurisdiction over such matters. Additionally, the plan administrator must determine that the order is qualified under the requirements of section 206(d)(3) of ERISA. It is the view of the Department that the plan administrator is not required by section 206(d)(3) or any other provision of Title I to review the correctness of a determination by a competent State authority pursuant to State domestic relations law that the parties are entitled to a judgment of divorce. See Advisory Opinion 92-17A (Aug. 21, 1992). Nevertheless, a plan administrator who has received a document purporting to be a domestic relations order must carry out his or her responsibilities under section 206(d)(3) in a manner consistent with the general fiduciary duties in part 4 of title I of ERISA.

For example, if the plan administrator has received evidence calling into question the validity of an order relating to marital property rights under State domestic relations law, the plan administrator is not free to ignore that information. Information indicating that an order was fraudulently obtained calls into question whether the order was issued pursuant to State domestic relations law, and therefore whether the order is a “domestic relations order” under section 206(d)(3)©. When made aware of such evidence, the administrator must take reasonable steps to determine its credibility. If the administrator determines that the evidence is credible, the administrator must decide how best to resolve the question of the validity of the order without inappropriately spending plan assets or inappropriately involving the plan in the State domestic relations proceeding. The appropriate course of action will depend on the actual facts and circumstances of the particular case and may vary depending on the fiduciary’s exercise of discretion. However, in these circumstances, we note that appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator’s determination of whether the order is a QDRO under ERISA.(5) The plan administrator’s ultimate treatment of the order could then be guided by the State court or agency’s response as to the validity of the order under State law. If, however, the administrator is unable to obtain a response from the court or agency within a reasonable time, the administrator may not independently determine that the order is not valid under State law and therefore is not a “domestic relations order” under section 206(d)(3)©, but should rather proceed with the determination of whether the order is a QDRO.

[david rigby]

I'm curious. Anyone had any first-hand experience with this, that you would be willing to relate? That is, anyone gone to the judge to say you think the divorce is a sham?

[mbozek]

Pax who is you? the Plan admin would have no standing in state divorce ct to contest the validity of the divorce because the plan is not a party (outside CA) to the divorce.

[KJohnson]

I think Pax was referring to DOL's suggested course of action:

However, in these circumstances, we note that appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator’s determination of whether the order is a QDRO under ERISA.(5) The plan administrator’s ultimate treatment of the order could then be guided by the State court or agency’s response as to the validity of the order under State law. If, however, the administrator is unable to obtain a response from the court or agency within a reasonable time, the administrator may not independently determine that the order is not valid under State law and therefore is not a “domestic relations order” under section 206(d)(3)©, but should rather proceed with the determination of whether the order is a QDRO.

It is not a question of standing, it is just a question of alerting the court. If the court doesn't do anything of its own accord-- on the grounds that the plan is not a party or for other reasons-- then you go ahead and accept it for purposes of whether it is a DRO.

[mbozek]

Persons who have standing as a party to a law suit have immunity for the actions taken before a court during a suit- parties who do not have standing can be sued for statements they present to the court regarding the invalidity of a divorce by a litigious employee and spouse. (I dont understand what reasonable steps to determine the credibility of the evidence could be). I dont think the plan could pay the legal fees for defending such a suit against the PA. The DOL did not consider this issue when it issued the opinion.