Misplaced QDRO

[Guest Newname]

Has anyone run into the following: QDRO acknowledged by Plan Administrator. Participant has been receiving retirement pension benefits for 9 years; alternative payee just contacted Plan to inquire when she can start receiving her benefits. Plan does investigation and acknowledges that due to an administrative error, the QDRO was not sent to the new Plan record keeper. Wants retiree to repay lump sum of overpayment from last 9 years, so it can send lump sum and monthly benefit to alternative payee in accordance with QDRO. Retiree was not aware of any overpymt until recent letter from Administrator. In fact, 9 years ago retiree requested a benefit calculation from Plan and accepted monthly benefit 9 years ago based on Plan's calculations. Is there anything relief for retiree or any law that protects Plan 'administrative error'? Thanks so very much.

[Guest mjb]

The retiree should just say no. The plan's only recourse is to sue the participant and the defense is that the plan delayed too long to discover the mistake and the participant would suffer a detriment to repay the funds. Also the plan can only recover the exact funds the were overpaid which will require that they trace the distribution and identify it as still being the participant's possession. If the participant has spent the funds the plan has no way to recover the excess distribution. Plan will have to make good the amounts due to under the QDRO.

[QDROphile]

The outcome may be different than mjb suggests, but it makes sense for the participant to start with a refusal. All of the next steps involve uncertainty.

[masteff]

And the fact that the plan sent a letter requesting repayment doesn't necessarily mean the plan intends to go back after the money. Even if they know they really messed up and might not expect repayment, they have a duty to send that letter.

[Guest mjb]

Plan will not be able to collect excess since it was solely responsible for mistake and employee retired in reliance on promise of benefits to be paid by plan. Employee needs to retain counsel if plan insists on collecting overpayment. Plan is in a bad position because it failed to discover mistake for 9 yrs. Case law puts a limit on how long plan has to recover excess payments.

[J Simmons]

mjb,

Do you know if that case law that puts limits on the recovery of the mispaid benefits this long after the fact would also prevent the plan from offsetting any future benefits payable to the employee by the over paid amounts? Would it also prevent the plan from correcting at this point the amount payable hereafter?

[Guest Newname]

Thanks to everyone for responses.

In the letter we received from the Plan stating we are required to refund a lump sum to the Plan and that my husband's future monthly benefit & my spousal share will be adjusted downward due to their administrative error, there was information stating we could request copies of the Plan. We are writing a letter requesting a copy of the Plan and all other correspondence and letting the Administrator know that we will be appealing their request for reimbursement after all these years due to their 'administrative error'.

HOWEVER, we are afraid they will garnish or just not pay any further monthly retirement to make up for their mistake? Can they just stop my husband's monthly retirement check until the funds are returned in full?

Also, I am having great difficulty finding legal counsel. A very good law firm said we need an attorney familiar with 3 areas: family law/employment/& pensions. I went to their recommended attorney who says we need a 'civil' attorney. Still others caution us to make sure the attorney specializes in QDRO's. No one in our town according to the Bar is 'specialized' in QDRO's. Another attorney said it all depends on the written retirement Plan and to make sure an unscrupulous attorney doesn't accept the case only to cause us alot more financial burdon without the hope of winning. I'm feeling hopeless and like I'm not getting anywhere (also dealing with cancer).

Our first step is to write the letter with our request for copies of the Plan and all correspondence and to advise we will be appealing within the 90 day limit. Without a legal background, we don't want to write anything that might hurt our case (if we even have a case). We really need help - does anyone have any suggestions??? Thanks so very much!

Newname

[Guest mjb]

Ignore the doofus who suggested 3 lawyers because they want you to pay for 3 lawyers. You no do not need a family lawyer because you are not trying to change the terms of the divorce which entitled your ex to pension benefits. The plan has the obligation of having to pay her. You dont need an employment lawyer because your rights are only subject to federal pension law under ERISA. You only need an ERISA attorney who specalilzes in QDROs and pension rights preferably a litigator. You should contact your local bar association or state bar. There is also some group at Boston U that provides services on retirement plans to participants and maintains a list of lawyers.

[Mike Preston]

I agree with mjb on the doofus issue. However, finding "just" a litigator with ERISA knowledge (or an ERISA attorney with litigation knowledge) may be difficult in some jurisdictions. You need to decide how much pain you are willing to endure to fight the plan. And by "pain" I mean both anguish and expense.

First, there may be some who will have a bit of difficulty conjuring up empathy for your position because the payments you have been receiving are most likely (although not with 100% certainty) higher than what a reasonable person would have expected from the plan when your benefits began. You may find it worthwhile to put your hands on documentation you sent and/or received when your benefits began which made it clear to the plan administrator that your benefits were to be determined after consideration of the QDRO. If you can't find that (and keeping something for that many years is also something that is never a 100% certainty) just be prepared for folks to at least raise that issue. Certainly the plan will raise that issue if they end up having to fight you in court.

Second, if you are willing to restore the monies to the plan (and I'm not trying to suggest that you should do this, just that it is one of your options) you might consider having your attorney contact them with the idea of negotiating a reduction to your benfits that is intended to repay the plan over an extended period of time. One Idea I've seen bandied about (although there are no hard and fast rules in this area) is that the period of adjustment whould match the period of time during which the overpayment went undiscovered. That would mean a 9-year period in your case. Roughly speaking, that means a reduction from your correct pension amount of roughly 1.5 to 2 times the amount of overpayment. Hence, if your correct pension was $1,000/month and you have been receiving $1,300/month, you can expect that your adjusted amount would be somewhere between $550/month ($1,000 minus 1.5 times $300) and $400/month ($1,000 minus 2 times $2,000). Obviously, even a 9 year repayment schedule can present a significant hardship to you, given that you would be reducing your existing monthly payment from, in my hypothetical example, $1,300 to, at best, slightly less than 1/2 of that and, at worst, to less than 25%.

Depending on how severe the reduction is to your benefit and, of course, how much it costs you to fight this, you have a very important decision to make.

You might want to contact somebody who provides assistance to participants at either low or no cost first to see whether you can get some of the confusion stripped away. The two places I am aware of besides the one mentioned previously (which can be found at: http://www.pensionaction.org/) are:

The Pension Assistance List: www.actuary.org/palprogram.asp

and

The Pension Rights Center: www.pensionrights.org/help/counseling.html

There may be others which you can find with an internet search.

My own personal opinion is that you would be well served by at least contacting an attorney with ERISA and litigation skilss to ensure that you don't do anything that would limit your rights in the future. It may be a challenge, as you point out, to find somebody locally. In that case, you should consider broadening your search.

Good luck.