Divorce, no QDRO

[Guest jetfaninmn]

I have come across my first non-QDRO request. A couple was divorced in 1994 and in the divorce decree it stated that the wife was due 1/2 the current value (6/1994) of her husband's pension and 401(k) at the point he reached retired or terminated service. No QDRO is on record. The ex is now looking for her money as the husband is leaving the job at age 45.

What must happen to do this? How about the 401(k) money that is still in the husband's account?

[Locust]

The divorce decree itself could be a QDRO - if the Plan has it (or is aware of it), it ought to be run through the QDRO review procedure. The payment to the husband should be suspended until everything can be worked out.

[Effen]

I have never seen a divorce decree used as a QDRO. I'm not saying it isn't possible, but I have never seen it. Maybe you meant the divorce decree can be drafted to serve a dual purpose?

We, and most attorneys we deal with, recommend to our clients that they don't even look at the divorce decree. They should only review the QDRO. It isn't the plan administrator’s responsibility to make sure the QDRO matches the divorce decree. The last thing you want to do is get involved in that type of dispute.

All that said, if the AP tells you she is in the process of obtaining a QDRO, then you would be within your rights to hold the participant’s distribution for a period of time. Otherwise, if you don't have a QDRO, the plan has no authority to hold up the participant's distribution.

Check your plan document for QDRO procedures.

[Locust]

Effen - I'm not saying a divorce decree is the best approach to a QDRO, but I don't think it can be disputed that a divorce decree is an order of the court issued in connection with a domestic relations order, and as such could meet the requirements for a QDRO. I've seen a few divorce decrees and some of them cover everything.

Also, so far as ignoring the divorce decree when there is a separate order, probably not a bad idea, but what if the separate order and the divorce decree are inconsistent and both have been submitted? Doesn't that create an ambiguity that the plan administrator should resolve?

J - my point is that a decree could be considered a QDRO and that the plan administrator had better treat it as a potential QDRO.

[Nate X]

I've seen all sorts of stuff try to pass as a QDRO including a divorce decree, but I've never seen one that had all the language required. In most cases, the lawyer (and sometimes the judge) does not understand the anti-assignment laws for qualified plans.

I agree with Effen, unless the divorce decree has a "dual purpose" (A DRO inside of the divorce decree), you should not use the divorce decree as a replacement for a DRO. The fact that you admit that the document is a "non-QDRO" should tell you right there.

I've also seen the divorce decree used as a "pre-notice" to the plan administrator where the spouse is making sure that none of the benefits due to him/her are paid out to the participant until a DRO is obtained.

[Effen]

Also, so far as ignoring the divorce decree when there is a separate order, probably not a bad idea, but what if the separate order and the divorce decree are inconsistent and both have been submitted? Doesn't that create an ambiguity that the plan administrator should resolve?

Even if it is submitted, the PA should inform all parties that it will not be considered. Just because it is submitted, doesn't mean they have to read it. The QDRO procedures should probably outline the process.

It is not the role of the PA to interpret the divorce decree. Two lawyers and a judge already approved the DRO before the PA gets it. I know there are sometimes inconsistencies, but the PA should stay out of the fight. What they don't know can't hurt them in this case.

[Locust]

This is my last reply, because I've said plenty already.

We have as Dirty Harry would say, a failure to communicate.

I'm not saying that a divorce decree is the best way for a spouse to present the court's order, and I'm not saying that most divorce decrees wil qualify as a QDRO.

I'm saying that a PA has to review a domestic relations order that is a final divorce decree that is submitted to it (or made known to it - to be safe) as a possible QDRO.

Effen and Nate: If you as a PA received a divorce decree that had all of the elements for a valid QDRO, would you deny it simply because it was not in the format you usually see, that is, a separate order dedicated to the QDRO?

And if you as a PA got a package that included both a final divorce decree and a conflicting order dedicated to the QDRO, would you ignore the divorce decree?

[Effen]

We have as Dirty Harry would say, a failure to communicate

Dirty Harry didn't say "failure to communicate", it was "Captian" in Cool Hand Luke.... "What we have here, is a failure to communicate".

If you as a PA received a divorce decree that had all of the elements for a valid QDRO, would you deny it simply because it was not in the format you usually see, that is, a separate order dedicated to the QDRO?

I'm not a PA, but think I understand what you are saying. I would still tell them to go back and bring me a DRO. There is lots of stuff in the divorce decree that doesn't belong in the QDRO. I wouldn't want to bear the added administrative expense to sort through it. What if you miss something? Taking shortcuts with this stuff is what leads to law suits down the road.

And if you as a PA got a package that included both a final divorce decree and a conflicting order dedicated to the QDRO, would you ignore the divorce decree?

Hopefully. I really feel it puts the PA in a bad spot (rock/hard place) if they get involved trying to interpret divorce decrees. They really have no authority to do so.

[Guest mjb]

While a divorce decree can qualfiy as a QDRO if it contains all of the requirements I have never seen a divorce decree that met all of the plan requirements for a QDRO since the divorce decree does not review plan provisions before it is issued. (most proposed qdros dont get it right either).

Dirty Harry would never use such pretentious language when "go ahead make my day" will do.

[Locust]

I said no more replys but I must say that I am embarrassed Dirty Harry/Cool Hand Luke mixup. Thanks (I guess) for pointing it out.

[Effen]

As long as we agree on the important stuff.

[QDROphile]

A divorce decree is a domestic relations order whether or not it qualifies. If one is submitted to the plan, the plan administrator is required to take some action with respect to it. The action will depend on the circumstances.

[Guest zora]

The best think you can do is follow your QDRO procedures. If you don't have them, get them. If you have them, and if they tell what to do when you receive a domestic relations order (e.g., a divorce decree), and if you have received a domestic relations order (e.g., a divorce decree), then just do what they say.

And fyi to everyone else, many courts have held that an everyday divorce decree qualified as a QDRO -- even though there was no separate "official QDRO." See, e.g., Metropolitan Life Ins. Co. v. Clark.

[Guest mjb]

Z: I thought that the Met life cases involved LI, not pension benefits for which it is much easier for a divorce decree to meet the requirements of a QDRO because the proceeds are paid in a lump sum and the bene are identifed in the divorce decree. There are many cases involving pension plans where ct have held that a divorce decree does not meet the requirements of a QDRO because it does not provide for the date of which the benefits will be paid, identify the plan from which the benefits are to be paid, how the benefits will be paid, e.g, separate or shared interest, survivorship rights or other provisions that govern rights of the parties under the plan.

[Kirk Maldonado]

The Metropolitan case did involve life insurance.

The QDRO rules don't apply to life insurance benefits.

[Guest mjb]

While welfare benefits are not subject to QDROs under 414p the courts have interpretated the term QDRO to apply to distribution under any employee benefit plan since QDROS are an exemption to premption of state laws under 514(a) refers to state laws relating to "employee benefit plan" not employee pension plans. There is also a fed case which held that NQDC benefits are distributable under a QDRO.

[Kirk Maldonado]

What can I say? The courts are flagrantly wrong. Nobody bothered to read the statute. The answer is obvious to anybody who reads it.

Section 201 of ERISA expressly states that Part 2 does not apply to a welfare benefit plan. Life insurance is a welfare benefit. The QDRO rules are contained in ERISA section 206. I can't understand how it could possibly be more clear that the QDRO rules do not apply to life insurance.

This reminds me of the COBRA issue that the U.S. Supreme Court had to resolve in Geissal v. Moore. There was a lot of litigation regarding this point because none of the judges or the attorneys bothered to read the statute. How anybody could litigate the issue involved in Geissal v. Moore is beyond me. The answer was so clear that it was the shortest Supreme Court decision on an ERISA issue I've ever read.

[Guest mjb]

Yes, but as John Marshall said over 200 years ago the law is what the courts say it is. Until the sup ct rules to the contrary, the majority of the circuits will apply QDROs to divorce settlements involving LI policies.

[Moe Howard]

I use marital settlement agreements all the time as QDROs.

A settlement agreement is part of a divorce decree. It lays out how the marital assets will be divided. The agreement is signed by a state court official.

There are only about 5 sentences that a QDRO must contain.

Who cares if those 5 things are buried in a ten-page settlement agreement.

What I usually do is highlight the 5 sentences that are scattered throughtout the settlement agreement. And send the entire settlement agreement to the TPA. (The TPA has to review the agreement and decide if it is or is not a QDRO).

I've had many TPAs call me to say that they have rejected the settlement agreement as a QDRO. Their reasons are always nonsense. That's when I tell them that ERISA and IRS (not a TPA) determines what a court order must contain in order for it to create a QDRO. ERISA & IRS don't care what the QDRO looks like, just that the required info is there.

Many TPAs want a QDRO to be a separate document, not a ten-page account of evertyhing but the kitchen sink (ie: who gets the car and who will pay for the kids college tuition someday, etc).

I would never send the TPA a agreement if it did not contain the ERISA & IRS requirements of a QDRO.

When a TPA representative balks, I simply ask them to have someone from their legal dept call me ... to which I always remind them that I'll call the DOL toll free number and request the DOL call the TPA to remind TPA that ERISA & IRS (not TPA) determines the form and content of a QDRO. That's one thing that TPA s hate (a call or letter from DOL). I always win. The TPA suddenly sees things my way and no call to DOL is necessary.

Locust is correct.

[stephen]

Isn't it up to the Plan Adminisrator to determine if it is a QDRO or not? It seems to me that it is only up to the TPA if they have been hired to make the determination.

[Guest mjb]

I use marital settlement agreements all the time as QDROs.

A settlement agreement is part of a divorce decree. It lays out how the marital assets will be divided. The agreement is signed by a state court official.

There are only about 5 sentences that a QDRO must contain.

Who cares if those 5 things are buried in a ten-page settlement agreement.

What I usually do is highlight the 5 sentences that are scattered throughtout the settlement agreement. And send the entire settlement agreement to the TPA. (The TPA has to review the agreement and decide if it is or is not a QDRO).

I've had many TPAs call me to say that they have rejected the settlement agreement as a QDRO. Their reasons are always nonsense. That's when I tell them that ERISA and IRS (not a TPA) determines what a court order must contain in order for it to create a QDRO. ERISA & IRS don't care what the QDRO looks like, just that the required info is there.

Moe: what kind of QDROs are you talking about? There are more than 5 sentences that relate to DB plan benefits that need to be stated in a QDRO and are not included in a divorce decree including commencement of benefit date, rights to survivor benefits, benefits options available to AP, shared or separate interest, consent by AP to waiving survivor benefit rights, etc.

Plan admin. require submission of a QDRO b/c it must be tailored to the provisions of the terms/options permitted under the plan and secondly to protect the plan from a claims by a party that they did not understand the rights that they gave up. I have reviewed claims by remarried participants that they did not understand that they were granting their ex spouse a right to all QPSA benefits when they signed the QDRO several years previously which prevents granting any survivor benefits to their current spouse. Plans require that the parties execute the QDRO and acknowledge that they are waiving such rights. Plan admin can require that party submitting a QDRO conform to the QDRO procedures established by the plan including acknowledging what benefits are are being waived or omitted.

Finally the IRS regs govern certain provisions a QDRO must contain, e.g, consent by AP to waiving survivor benefits which is contrary to your statement that regulatory agencies don't care about what terms a QDRO contains. See reg. 1.401(a)-13(g).

[Moe Howard]

mjb, What kind of QDRO am I talking about? Well there is only one kind. It's the kind described in DOL 206(d)(3). Read that code section and you'll see the only five things a QDRO must contain.

You say that plan administrators require QDROs because .....

That is nonsense. The reason that PA require a QDRO is because the DOL requires that the PA be furnished the QDRO.

"QDRO procedures established by the plan" .... What does that mean?

mjb, keep in mind that neither a PA or plan can supercede ERISA. A alternate payee can ignore any plan requirement that is not required by ERISA or allowed by ERISA.

I made no statement that "reg agencies don't care what terms a QDRO contain". mjb, are you drunk?

[Guest Pensions in Paradise]

Hey Moe, before you keep spouting off you might be interested in this little blurb from the DOL's webite:

1-14: Will the Department of Labor issue advisory opinions on whether a domestic relations order is a QDRO?

No. A determination of whether an order is a QDRO necessarily requires an interpretation of the specific provisions of the plan or plans to which the order applies and the application of those provisions to specific facts, including a determination of the participant's actual pension benefits under the plan(s). The department will not issue opinions on such inherently factual matters.

Reference: See ERISA Procedure 76-1, 41 Fed. Reg. 36281 (1976)(Appendix B)

And your comment about threatening to call the DOL made me laugh. The Plan Administrator is ultimately responsible for determining the status of a QDRO, not the DOL. Only a Federal court can overrule a Plan Administrator's determination. So call the DOL all you want.

[Moe Howard]

Pen, the blurp you burped is correct and does not contridict anything I have posted. I never said that the DOL issues advisory opinions on the qualification status of a domestic relations order.

The PA determines if a DRO is qualified. The DOL determines the requirements of what info a DRO must contain in order for the DRO to be qualified. In other words the DOL sets one rule (and one rule only) that the PA must obide by in the PAs determining if a DRO is qualified. That rule is ... if the DRO contains the five items required by DOL, then the DRO is qualified. It's that simple.

Your belief that only a federal court can overrule a PA is nonsense. I can tell that you have never been involved in a DOL audit of a pension plan. The DOL may not offer an advisory opinion to anyone who request one, but they sure do send letters of notification to plans when plan participants file complaints to DOL. That is usually how DOL audits and DOL inquiries arise. If the DOL determines (from its its audit or limited inquiry) that a DRO is qualified, which the PA determined was not qualified, the DOL will assist the alternate payee in having the plan correct its error. Sometimes its resolved in court and sometimes it is resolved without filing in court.

Keep in mind that ERISA was enacted for the benefit plan participants, not plan employees or plan service providers.

I know why my threatening to call the DOL made you laugh ..... it's because you are not aware of how the DOL operates and the investigation procedures the DOL follow when a participant reqisters a complaint with the DOL.

[Guest Pensions in Paradise]

Thanks for the further laugh Moe. The point of my "blurp" was to point out that the determination of a QDRO is not automatic, even the DOL acknowledges that it can involve the interpretation of plan provisions.

P.S. - I am well aware of the DOL's procedures. And yet I still laugh at some of their actions. I could tell you quite a few stories of things they've missed in audits.

[Moe Howard]

Pen, you sure do laugh a lot. It's good that you find humor in employee benefits. You seem to be a happy person. I suggest you watch the David Letterman show (you'll get a lot of laughs and it will get your mind off employee benefits for a little while).

[Madamex]

A Quadro is only a tool used to execute a divorce decree actually divides the property.