401k IRC 72p

[Guest TrustButVerify]

Advisement sought on matters disclosed below:

1. Requriement, if any, to provide alternate payee under a pending QDRO, an opportunity to review or otherwise a copy of the 404C/401k 'official plan text'. (Largest US telecommunication provider.)

2. If no requirement exists, what legal action could be taken to force such disclosure/opportunity to review.

Purpose by alternate payee appears meaningful - to prove harm associated from loans initiated by plan participant (payee) who clearly took out 2 loans within 4 months and 2 weeks of each other ($25,000 Aug 2003) and ($10,000 Nov 2003).

Plan participant appears to have also not disclosed to alternate payee, the second loan taken in violation of Court Order.

Alternate Payee seeks opportunity to review and otherwise copy 'official plan text' pertaining to IRC Loan 72p. Alternate payee also seeks valuation of portfolio since date of filing as basis of its half of the accretion during the marital period, as well as its half of market appreciations, dividends, losses and the like. Case law seems absent on the matter - no one apparnetly has tried such a claim. Alternate payee seeks specific language as to the funding of the loans. SEC 11-k uses 'collateralized' when there is a true FIFO sale according to an SPD depicted schedule of fund families and contribution types.

Advisement Sought on requirement to disclose and how disclosure could be forced.

Thanks,

-TrustButVerify June 21, 2007

[J Simmons]

The DoL's position can be found at http://www.dol.gov/ebsa/Publications/qdros.html.

In section 2-1, it is provided that

It is the view of the department that Congress therefore intended prospective alternate payees -- spouses, former spouses, children, and other dependents of a participant who are involved in a domestic relations proceedings -- to have access to plan and participant benefit information sufficient to prepare a QDRO. Such information might include the summary plan description, relevant plan documents, and a statement of the participant's benefit entitlements.

The department believes that Congress did not intend to require prospective alternate payees to submit a domestic relations order to the plan as a prerequisite to establishing the prospective alternate payee's rights to information in connection with a domestic relations proceeding. However, it is the view of the department that a plan administrator may condition disclosure of such information on a prospective alternate payee's providing information sufficient to reasonably establish that the disclosure request is being made in connection with a domestic relations proceeding.

It is the department's understanding that many domestic relations orders fail initially to qualify when submitted to the plan because they fail to take into account the plan's provisions or the participant's actual benefit entitlements. Affording prospective alternate payees access to plan and participant information in a timely manner will, in the view of the department, help drafters avoid making such obvious errors in preparing orders and, thereby, facilitate plan administration.

If you reasonably articulate in detail in your request to the administrator of the plan why you need the info about the plan's loan provisions in order to draft an adequate QDRO and that the (ex-)spouse is in fact pursuing a QDRO affecting benefits under the plan, then the DoL's position is that the administrator should provide it to the putative alternate payee.

As for encouraging the administrator to then provide the info if the administrator resists, I think you'd need to involve the regional office of EBSA, or ultimately file in federal court. The DoL's position is that the plan should not be subject to being hailed into the state divorce court proceeding. See part 1-2 of the linked DoL discussion.

[masteff]

So have you asked for the information and they refused? As J notes, provide them enough information to conclude a QDRO is in the works.

In addition to what J said...

Have you tried simply asking them what they need to be able to provide you the information? Sometimes, if you use the wrong form of request, then you can be turned down based on form. Have you asked for a copy of their QDRO procedures and, if they have one (which they likely do), of their model draft?

Also, did you use the legalese "pertaining to IRC Loan 72p"? Try asking if their loan procedures are part of the plan document or are in separate loan procedures, then ask for a copy of that. Bring the language to their level, don't expect them to translate legalese on basic information requests.

As a plan administrator, I'd advise you to not get hostile (e.g., "how disclosure could be forced"). Just ask them to tell you what you need to do to comply with their procedures. Keep in mind that they are a bureaucracy, find out what the rules are and work within them and things will go much, much easier. If you don't have the patience for it, have an assistant call them. They are not trying to fight you or deny you something like an opposing divorce atty might.

Oh, and if push does come to shove. Call their legal department and ask what info a supeona needs to contain to get the requested info.

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[Guest mjb]

why not provide AP with the same right that any bene has examine the plan at office of Plan admin or to obtain a copy of plan if AP pays the appropriate fee of .25 per page?

I dont understand the valuation of the portfolio demand. Plans do not provide information on investments such as dividends, apprecation and losses, etc. to participants. AP cant force plan admin to provide info that is not available. Plan could provide account balance for particpant over a period of years if available.

Masteff: what is the statutory provision in ERISA which would permit the AP to serve a subpoena in a divorce action on a non party such as the plan admin? Your overlooking that counsel large corporate plans turn down frivilous and unenforceable demands from divorce attorneys all the time.

[masteff]

why not provide AP with the same right that any bene has examine the plan at office of Plan admin or to obtain a copy of plan if AP pays the appropriate fee of .25 per page?

I dont understand the valuation of the portfolio demand. Plans do not provide information on investments such as dividends, apprecation and losses, etc. to participants. AP cant force plan admin to provide info that is not available. Plan could provide account balance for particpant over a period of years if available.

Masteff: what is the statutory provision in ERISA which would permit the AP to serve a subpoena in a divorce action on a non party such as the plan admin? Your overlooking that counsel large corporate plans turn down frivilous and unenforceable demands from divorce attorneys all the time.

1) Perhaps your getting more out of what the OP said, but sounds to me like he's just wanting an account statement from the date of marriage to current (he just didn't state it very plainly). The problem is, the plan doesn't have an obligation to provide that if they don't have those records anymore. Just have to ask if they have account values going back that far (if it's recent marriage, then might not be a problem, but if many years, then might have been purged.)

2) Gee sorry, I'm not a high flaluten lawyer type, just someone who occassionally got a memo from our legal department that a supeona had been received and please provide the following. Now if you wanted to be adversarial and fight providing info then by all means, you just go right ahead w/ your "unenforcable demand" position. Oh, and you'll note that I didn't tell him to make a frivilous request, I told him to work w/ the employer to follow their procedures.

[QDROphile]

Pre-QDRO, there is no right to plan documents or account information, subject to subpoena. The Department of Labor is wrong and if it were really serious or sincere it would write some helpful regulations to give us guidance and give the fiduciaries some confort . Until then I flout its position.

I think a subpoena has a reasonable chance of success and I think it is bad policy to oppose a subpoena. However, I think plans should require a subpoena for personal information. I don't see the point of fighting over a plan document.

The divorce court can order the participant to request the documents and statements and turn them over to the other party.

[Guest mjb]

Q: who is subject to the subpoena? Many plans have outsourced plan adm duties and the PA may not be the proper party for providing the info. The usual procedure that is accepted is for the state family ct to order the participant to request the information needed by the AP from the plan and then send it to the spouse instead of serving a subpoena on the plan or PA since it has juirsdiction over the participant. It is very difficult to enforce a state ct subpoena against an plan or PA for a multistate/int co who resides in another state because the subpoena may not be valid and enforcing it will be very expensive for the AP.

[Guest TrustButVerify]

I apologize for the legal-eze. I am trying to keep this objective.

An effort will be made to better liasie between AP and the Plan Committee, which share the same county/state jurisdiction.

In addition to the 2 loans taken prior to Final Judgment of Divorce, an additional loan was taken Sep 2005 for $21,900, where $3,200 was cash distributed to Plan Participant and the remaining $18,700 was allocated to refinance the outstanding balance of the $25,000 loan initiated Aug 2003. Note, that Aug 2003 loan was in default since Nov 2004, when Plan Participant left the company under a force management plan. It is worth noting that the Plan Participant maintained regular payments on the $10,000 loan initiated in Nov 2003. Note also that no 1099-R has been issued or is apparently intended to be issued.

As such, the plan particpant liquidated $56,900 of 401k plan holdings to fund the loans. Records depict that this is more than was contributed by the plan participant and company match made during the marital period.

The Family Court continues to show itself clearly biased against the alternate payee. There is little or no expectation that a Famiy Court related subpoena will be enforced by the Family Court.

The Family Court ignored statements depicting realized gains and associated basis of positions liquidated to fund loans. The Family Court apparently dares AP to incur extensive transcript costs for appeal and remand back to family court.

The Plan Committee and the QDRO servicing company are located in the same county as is the Family Court.

The QDRO servicing company, the Plan Committee and the Plan Administrator (located in a different state than the Plan Committee and the QDRO servicing company) maintain a common position of not providing the plan text/document.

The Plan Administrator and the QDRO servicing company is not producing the loan requests, terms & agreements, or a depiction of how each loan was funded and, similarly repaid.

The Family Court has taken the Plan Participant's position that any loans were effectively (margin) loans 'collateralized' by holdings within the 401k, and further, that the periodic repayment of loan principal restored positions (FIFO basis) to plan participant, and that the periodic payment of interest was a contribution to the plan participant's balance, and invested according to the PP's allocation decision.

The loan documentation is depicted in several documents.

The SPD dated July 01, 2003.

HOW MUCH YOU CAN BORROW

...Security for each loan will be your outstanding loan

balance, but will not exceed 50% of your vested Account

balance at the time that the loan was taken....

Repaying Your Loan

When you endorse the loan check or accept an electronic

payment of the loan, you agree to the terms of the loan

and promise to repay the principal with interest.

Repayments follow these guidelines:

• Loan repayments made through payroll deductions are

posted to your LTSPME Account monthly.

• Loan repayments made either by electronic payment or

by mail should be made monthly.

• Company Matching Contributions are not made on loan

repayments.

• Each repayment is applied first as interest on the

unpaid principal, with the remainder applied to reduce

the unpaid principal.

• Principal and interest repayments are applied to the

sources in your LTSPME Account in the reverse order

from which your loan was withdrawn.

• Repayments will be invested according to your current

investment elections if you are repaying your loan

through payroll deductions. If you have no investment

election on file, or are repaying your loan by electronic

payment or by mail, repayments will be invested in the

AT&T Stable Value Fund.

• If you are on a leave of absence, you will have the

option to make loan repayments by electronic payment

or by mail.

• Former employees, employees eligible to contribute to

another AT&T Savings Plan, employees transferred to

a non-participating company and employees receiving

workers’ compensation will repay the principal with

interest to their Accounts by electronic payments or

by mail. Loan repayments for these employees will be

invested in the AT&T Stable Value Fund.

• If you do not make all of your scheduled loan repayments

during the term of your loan, you will be required to

make a balloon payment if there is still a loan balance

on the termination date of your loan. Your loan will be

defaulted if you do not make the required balloon

payment when requested.

The SMM dated July 2006.

Only discusses hurricane loan relief.

The SMM dated July 2005.

Only indicates a change in how future loan rates would be applied.

The SMM dated July 2004.

Only indicates a change in how loan rates apply pertaining to leave due to military service.

The SEC 11-k is dated Dec 31, 2003 and states the following:

Loans are available to all participants in an amount not less than $1,000,

up to a maximum of the lesser of $50,000 minus the participant's highest

outstanding loan balance in the last twelve (12) months or 50% of the

participant's vested account balance. Upon default, participants are

considered to have received a distribution and are subject to income taxes

on the distributed amount. Loan transactions are treated as a transfer to

(from) the investment funds from (to) the Participant Loan Account. The

term of the loan shall not exceed fifty-six (56) months. The loans are

collateralized by the balance in the participant's account and bear

interest at the prime rate on the last business day of the month preceding

the month in which the loan was initiated. Interest rates are fixed for the

term of the loan. Interest rates on participant loans outstanding at

December 31, 2003 range from 4.0 percent to 9.5 percent. Principal and

interest are paid through payroll deductions or participant-initiated

payments.

PP clearly intends to not provide any benefit to AP.

AP is aggressively pursuing documentation to demonstrate rights to equity claimed.

Plan Administrator, Plan Committee & QDRO servicing department want the matter resovled ASAP.

A very sticky wicket.

I welcome any further advice in light of the above.

Many thanks,

TrustButVerify -June 22, 2007