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A Late Late Late QDRO


Guest Grumpy456

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Guest Grumpy456

Is there a statute of limitations applicable to QDROs? I have a client that sponsors a DB plan (and has since the 1970s). In 1989, a participant and his spouse got divorced. The settlement agreement incorporates terms that qualify as a QDRO. The participant later remarried. About 4 years ago, the participant retired and elected a joint and 66-2/3% survivor annuity naming his second wife as the beneficiary. Last week my client received a letter from the participant's first wife along with a copy of the settlement agreement and QDRO dating back to 1989. The first wife now wants part of the participant's benefit.

This is a real mess because the terms of the QDRO anticipate using a separate interest approach, but now that the participant is in pay status, it is impossible to do that (or so it seems to me).

Roughly 16 years have passed between the date of the divorce and presentation of the QDRO to my client's plan. During that 16 years, the participant has remarried and retired. In fact, for the past 4 years the participant has been receiving payments from the plan. Does a QDRO ever become "stale"? Put differently, is there a statute of limitations that runs with respect to QDROs?

One of my colleagues says that this is akin to a claim for benefits and that such a claim is generally subject to state statutes of limitation relating to contract actions (i.e., 6 to 8 years probably). Another colleague tells me that so long as the state court that originally issued the order retained jurisdiction over the order, there really isn't any statute of limitations.

Thanks, in advance, for your thoughts.

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Both of your colleagues are wrong for one reason or another. Nothing about the age itself is an issue. However, the order is evaluated at the time that it is submitted to the plan. The plan, the law (or understanding of the law) and other circumstances may have changed since the order was drafted and the changed circumstances can have a profound effect on the outcome, including the disqualfication of an order that may have been qualified if it had been submitted years ago.

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If the QDRO was completed several years ago but not presented until recently, and is later determined to be valid, it seems appropriate that it be applied prospectively only. Or does this matter? Or might there be some malpractice by the AP's counsel?

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 dont see how the QDRO can be enforced for 1 or more of the following reasons:

1. It was not presented to the Plan adm before the participant retired. There have been several threads on this topic before and court decisions in Fed appeals cts hold that benefits are vested on the date the participant retires.

2. the DRO would require a benefit form not paid under the plan, or

3. Allocating the AP's benefit would reduce the surviving spouse benefit payable to the current spouse in violation of case law.

Why is the lawyer to blame? The AP probably did not want to pay for the cost of getting the plan to approve the DRO at divorce because there was no immediate benefit for the amount of money she had to pay.

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Why is the lawyer to blame? The AP probably did not want to pay for the cost of getting the plan to approve the DRO at divorce because there was no immediate benefit for the amount of money she had to pay.

I read the original post to mean the QDRO was prepared at the time of divorce. If so, might counsel be at fault for failing to send it to the plan administrator? (Granted, we don't know "fault", but it's just a question.)

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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That is the point. The alternate payee cares.

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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Are you sure the PA didn't receive it timely and just forgot or lost it? Heck, I can hardly remember what I reviewed last week let alone 7 years ago.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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Guest Grumpy456

In this case all of the parties agree that the QDRO was never submitted to the plan administrator in 1989 and was only recently submitted (after the alternate payee discovered that her ex-husband was retired and receiving his benefit). Thanks for all of the comments.

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In this case, it would appear that there was never a QDRO, but merely a DRO that was never qualified by the Plan Administrator. An actual QDRO would place to onus on the Plan Administrator to track and enforce the rights of the Alternate payee.

While the QDRO cannot require a plan offer options to the Alternate payee that are not allowable under the terms of the plan, an immediate distribution pursuant to a QDRO would not cause the plan to fail to qualify. Hence, it's always good for the Plan Administrator to have an elaborate set of QDRO procedures.

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E- How can the plan provide an immediate distribution to the AP from the employee's annuity once it is in pay status based upon the employee's life expectancy and is the employee's separate benefit? Also case law does not permit a DRO to be presented to a Plan admin for review as a QDRO after retirement benefits commence. The PA would deny the request for benefits under the DRO under the claims procedure rules of the plan.

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This order was issued by the court back in 1989, presumably when the participant was still employed.

The immediate payment comment was that in the event no other distributable event exists under the plan, a distribution pursuant to a QDRO (provided the plan allows) will not cause the plan to fail to qualify.

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From an ERISA/Code perspective, I think that an alternate payee can present a shared payment QDRO to a db plan after a participant's retirement (providing for deductions from participant's pension during participant's life). This would not provide alternate payee with the same benefit as a separate interest qdro, but would still provide some benefit to the alternate payee.

Actually, some in my office have argued that an alternate payee should be able to present a separate interest qdro after participant's retirement, but I think that presents more difficult issues to be resolved.

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The AP has a right to go back and change the order to get the shared payments if the order fails to qualify because its original terms no longer work. The AP has a reasonable time to do so after notice of disqualificaton and some of the participant's payments may have to be suspended while the AP is working on a new order.

Whether or not the AP can get a new order will depend on state law.

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While the AP can get the order changed it will not provide any benefits for the AP since the DRO was not presented to the Plan admin prior to benefit commencement date. The AP cannot ask for a shared payment now because that would reduce the vested benefit of 2nd spouse or increase the liability of the plan ( or reduce the benefits of the participant). The plan admin will deny the DRO under the benefit claims proviion of ERISA which will require the AP to sue in Fed ct where the precedents are against her because she did not present the DRO before benefits commenced.

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Guest Grumpy456

Can one of the folks who mentioned cases in which a plan successfully argued an AP had no right to a plan benefit because a QDRO was presented to the plan after benefit payments commenced send me a citation? Thanks!

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I have not seen any cases that would prevent an AP from presenting a shared payment QDRO to a db plan after payment of pension to the participant begins, or for that matter, barring the qualification of the DRO in such case.

There have been cases barring benefits to APs who present a QDRO to a db plan after the participant's death, particularly where the participant's benefits are payable to a second spouse under mandated spouse benefits.

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mjb:

Forget the controversy over the survivor annuity, that has been hashed out to no resolution in other posts.

But I would love to see some authority or even a plausible unsupported explanation of why a domestic relations order would not qualify if it split the participant's monthly check for some period, not to exceed the particpant's life. While one can assert that the form of benefit is an annuity for the life of another, and therefore is not one of the plan's offerings, that is too hypertechnical in a post retirement environment (it is OK in a pre-retirment environment) because it would effectively either (i) essentially prevent QDROs in a post-retirment environment, or (ii) require a plan to reform the benefit and provide separate annuities. Option (ii) would do far more violence to the plan and create a terrific opportunity for adverse selection.

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1. because the DRO was filed with the plan admin after a trriggering event occured 2, because the DRO was issued for a separate benefit and under the election of remedies doctrine the AP cannot now change her benefit to a shared amount to the detriment of the participant's vested interest 3. because a shared benefit is not an option under the plan 4. statute of limitations under applicable state law for bringing a claim for benefits may have expired.

If the plan denies the AP claim she will have to sue in Fed ct to overturn the denial by the PLan Admin. Would you advise her to spend the $ on this kind of a case where the cts are unreceptive to late DROs.

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I am shocked that you would consider your last two sentences in advising a plan administator about the appropriate way to handle a matter. We are talking about what is right, not what you can get away with.

Although I don't quite understand all of you other responses (election of remedies doctrine?), I think they are misplaced and I don't care to engage you any more on the issue. I stand by my position.

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I am shocked that you would consider your last two sentences in the context of advising a plan administator about the appropriate way to handle a matter. We are talking about what is right, not what you can get away with. Besides, when the alternate payee wins, she can probably get attorney's fees and I have a different view of the prospects of winning. I have stared down several union plans that took unacceptable views of QDROs and were used to getting away with bully tactics until someone showed a willingness to go to court.

Although I don't quite understand all of your other responses (election of remedies doctrine?), I think they are misplaced and I don't care to engage any more on the issue. I stand by my position. Your best point is that the state court may be unwilling to reopen the matter to change approach.

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You overlooked the caveat "if" at the begining of the first sentence (which applies in the event of a possibile outcome not a pre determined result as you believe) which would apply my statement in the sentence (which was not advice) only in the event the plan admin denied the claim for one or more of the above reasons. You failed to answer my question of whether you would advise the AP to pursue recovery of benefits at considerable financial cost given the long odds against recovery under case law. Some of the best advice given to a client is dont spend your money on a bad claim.

I dont think a lawyer would take this case based upon the possibility of recovering legal fees only if the AP prevails. I have seen numerous participant benefit claims rejected in ct on procedural matters such as statue of limitations or burden of proof, without ever getting to the merits of the claim Other claims fail because of the presumption of validity of the denial of the claim by the plan admin under fed case law. The denial will be upheld as along as there is any reasonable explanition. One case was dismissed without a trial because the participant waited too long to sue after he became aware that the plan admin would not pay the benefit even though his claim for benefits was not denied until several years later. Judging from your posts I dont think you have ever represented a plan participant in a beneft claim.

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Some final comments of my own:

1. The rights of the AP to an assignment of the Participant's benefits will be decided by the state courts. The Plan Administrator should not be involved in this, including whether the AP may pursue a shared payment QDRO rather than a separate interest QDRO. The Plan Administrator's role is to review the DRO received for qualification under ERISA and the IRC.

2. I'm baffled how a shared payment QDRO providing for a deduction from the particpant's pension during the period of payment to the participant requires the plan to provide a type or form of benefit or option not otherwise provided for by the plan (or how it otherwise violates the ERISA and IRC QDRO requirements). Seems fairly close to the deduction required or permitted for tax liens, income tax withholding, insurance deductions, etc.

3. DOL's position (expressed in the preambles to its final claims regulations) is that the qualification of a domestic relations order is not a claim for benefits. The majority of courts have determined that this issue is reviewed de novo as a legal conclusion or question of statutory construction. In such case, the abuse of discretion standard of review would not apply to the plan administrator's determination. The courts that have treated the qualification of a DRO as a 502(a)(1)(B) claim, primarily in the 9th circuit, have done so in the context of finding state court concurrent jurisdiction under 502(e)(1) over the qualication of the DRO issue.

4. Rendering an opinion on the application of a statute on the basis of whether the matter is likely to be challenged is not necessarily a very sound approach. I have invested my own time in pursuing the rights of an AP (and for that matter, participants), where the primary questions from counsel for the plan administator seemed to be "why are you doing this? and "how are you getting paid?"

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Guest mjb

RTK- do you have any idea how much money the AP will have to spend on lawyers fees asserting each of the theories you have stated with the risk that if she loses at any stage its all over? Why do you think the APs claim is not a claim for benefit since asserting APs claim for benefits will a require a reduction of the participant's vested benefits in payout (preambles do not have the force of law on a plan)? Have you ever represented someone as counsel in a benefit claim under ERISA and advised them of the risks involve in pursing a claim (to avoid a future malpractice action)? I dont understand what you were refering to in #4.

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