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Interpreting Terms of a QDRO


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I'm reviewing a DRO for a plan. The DRO awards a percent to the AP as a separate interest. The DRO also specifies that the AP is to be treated as the 'spouse' of the portion awarded to the AP (rather than the benefits retained by the participant).

There is no significance to DRO specifying that the AP is the 'spouse' of the awarded benefits, because no QPSA/QJSA rights apply to awarded benefits.

It would seem that since the QDRO concept is an exception to the general rule of anti-alienation from the participant, that the QDRO ought not be interpreted expansively. So on top of the literal reading, there's reason that the plan would also not presume to apply this 'spouse' treatment for the AP to the benefits retained by the participant. Does this general rule of legal interpretation apply to QDROs?

This provision in the DRO does not preclude it from being a QDRO.

Since the plan merely reviews the DRO to determine if it qualifies as a QDRO, it would seem that it is not the place of the plan to bring this error to the attention of the alternate payee and the participant--the participant may not be too happy about the plan doing so and thus setting in motion a course of events that might lead to the participant's rights to the retained benefits being encumbered by the AP fixing the QDRO and being the 'spouse' as to those retained benefits.

Is there a duty on the plan to bring the error to the attention of the AP?

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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I'll let the attorneys comment on duty, but....

- it might not be an error.

- you work for the plan, right?

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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When I see such provisions, I think that the drafter is trying to assure the the AP's interest is not totally lost because of death of the participant before the AP starts benefits. You did not say directly that the plan is a DB plan, but this is a legitimate concern in a DB plan. Since the term "separate interest" does not have an accepted meaning, the drafter cannot be sure of the consequences of its use. A more direct approach to making sure the AP gets a prescribed share of the death benefits is better. I do not presume that the AP intended to get a piece of the participant's remaining interest, but was simply inept.

Since I do not believe in separate interst under DB plans. I believe that the portion of the award to the AP can be used to define the dealth benefit payable to the AP if the AP fails to get the portion of the regular benefit becuase of untimmely death of the particpant.

While I agree that the plan should not get involved in trying to correct conceptual errors or attempts by one party to fool the other, there is nothing wrong with the plan to say, as a condition of qualification, how the plan interprets the provision, including an example of an outcome that makes the point. The plan has an interest in avoiding later disputes over interpretation, so it is best to get the issues resolved to the plan's satisfaction now, while the plan had total control. You don't have to guess at what was intended -- state how it will be interpreted and let the parties work out what was intended.

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