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Reality Check - Attempt to Amend QDRO

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As an attorney, I assist a plan administrator in determing whether DROs are qualified.

I'm about to 'reject' a proposed Order that purports to amend a QDRO accepted in 2000.

In 2000, at the time of divorce, the ex-wife/Alternate Payee expressly waived (in the QDRO) any interest in the pension, but did take in interest in the 401(k) Plan.

Now, 6 years, later, participant's Pension is in pay status already, and ex-wife has submitted a proposed amending order seeking a 100% INTEREST IN THE VALUE OF HIS PENSION AS OF THE DATE OF HIS RETIREMENT.

Since he's already in pay status, I'm planning to reject on the basis of the Order requesting benefits not available under the plan. (Some of his pension has already been paid to him, so she can't get "100% at this point).

This feels funny in other ways, though. He's now in a nursing home. His two kids' names are on the order as his "agent" (but her attorney drafted the amending order.).

Plan is inclined not to accept any amending order, even if they refine it to a permissible benefit.

This is under Pennsylvania state law.

Any ideas on the kind of documentation, etc. Plan Administrator could say it would require before considering approving such a request?

Thanks for any insights.

In the meantime, sorry, Alternate Payee. This one's a no go.

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Q1- What is the authority under state law for the AP to request a modification of the QDRO that was agreed to 6 yrs ago? Usually a QDRO is a final agreement of the parties as to how pension assets are divided and unless the court retains jurisdiction to revise the QDRO after the divorce it is a final order which cannot be changed. In other words what authority is there to change the terms of the QDRO that were entered into 6 yrs ago to give her both penson benefits of her ex?

Q2 what is the position of counsel for the employee regarding the requested change? If the ee is a nursing home he may not be competent to wavies his rights to the pension. If the employee's nursing home expenses are being paid by medicad which requires that all of the income earned by the employee to be paid to the nursing home to offset the cost of govt provided care, transferring payment to the AP without a good reason could constitute fraud.

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The plan administrator does not have to worry about state law. The state court is reponsible for fairness and dealing with any skullduggery. The plan is not an enforcer for the government, either. As long as the plan receives what is reasonably believed to be a domestic relations order, the plan deals only with the terms of the order. Get a certified copy.

I agree with rejecting the order because it provides for an improper amount. I would not go so far as to reject an order that was proper, such as awarding the AP all of the future benefit payments.

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I totally agree the plan should not look beneath the QDRO. If you get a valid state DRO, ask yourself if it is a QDRO and, if so, follow it.

This is interesting on different levels. Under federal law, the spouse waived her rights in the previous QDRO. ERISA recognizes a federal common law of waiver. If you are so inclined, you may be able to argue that waiver precludes an amendment to the QDRO because the participant is now assigning those benefits pursuant to something other than a QDRO. But that boils down to whether the state order is a DRO, or just a state order. If the court says it is a DRO, then it is a DRO. Also, I'm sure many on this board will say the plan should not care who gets the benefits.

Another thing you could do, if the plan is so inclined and wishes to spend a little money, is interplead the funds into federal court. The federal court may appoint a guardian to protect the participant, and the guardian may intervene in the state court action. But I really don't like this approach -- too much money, time, and effort for too many ifs.

The likely possibility - quite likely considering the nursing home situation - is the former spouse is doing this to help out with Medicare/Medicaid issues. Again, that is the state court's issue, not the plan's, though, again if you are so inclined, you may want to tip off Medicare/Medicaid, or even the court per the DOL opinion.

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FYI - here's how we're proceeding for now: we are rejecting the amended order because, as currently drafted, it requests a benefit not available under the plan (i.e. 100% or participant's benefit as of retirement date, but he has already entered pay status).

If the Alternate Payee resubmits the order with a permissible benefit request (i.e. 100% of Participant's benefit going forward), then we'll approve it if it meets the IRC 414(p) requirements. In our approval letter, we will state that the Order is a QDRO, and that our determination was limited to the satisfaction of the Order of the Code and plan requirements, and that we presume that the state court and Alternate Payee's attorney have ensured that the Order satisfies state law and is not drafted in contravention of the requirements of Medicaid. That way, at least, Alternate Payee's attorney is on notice, and we've covered ourselves should there be any future dispute.

If there is a DOL Opinion relating to QDROS and Medicaid, I'd be curious to know of it, too.

Again, thanks all!

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The DOL opinion on sham marriages says if the PA believes they are a sham then the PA may want to inform the judge. Similarly, if the PA believes these folks are using the court to commit fraud against the government, the PA may want to let the judge know its thoughts.

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can you provide a link?

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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