"Stale" QDRO

[Guest cac1134]

We represent the plan and review DROs for compliance. A participant applied for benefit commencement and the file revealed a DRO submitted for review in 1993. The DRO was not approved and the details of the noncompliance and suggested solutions were communicated to the participant, alternate payee and their counsels. Then, nothing. The 1993 letter was the last correspondence. What should we do now? Thanks for any thoughts.

[J Simmons]

In the communication to the P, the AP, and the lawyers, did you provide a copy of the plan's written QDRO processing procedures that explained how and the timeframes in which they could contest the initial decision that the DRO was not a QDRO? Did the communication set out any time line for when they must challenge the initial determination that the DRO was not a QDRO?

[Guest cac1134]

It doesn't seem like it. I was thinking of writing to the attorneys along the lines of "P has applied to retire effective {date}. Fund records indicate that a dro was presented {date} with respect to P's benefit under the plan. This dro is not qualified. Please advise if you intend to submit a revised dro for review."

[J Simmons]

You might want to specify how many days from the date of your letter that they'll have to submit a revised DRO or appeal the initial denial. I'd also send the letter certified so you have proof that all received it.

[Guest mjb]

We represent the plan and review DROs for compliance. A participant applied for benefit commencement and the file revealed a DRO submitted for review in 1993. The DRO was not approved and the details of the noncompliance and suggested solutions were communicated to the participant, alternate payee and their counsels. Then, nothing. The 1993 letter was the last correspondence. What should we do now? Thanks for any thoughts.

Why is there a need to contact the parties who have chosen to be silent for 14 yrs after the DRO was rejected? The denial of the DRO put the AP and counsel on notice of the requirements for approval. The failure to respond to the denial consitutes an admission that the parties were not interested in obtaining a QDRO. It is likely that any corespondence will not reach the AP at the last address from 14 yrs ago. I dont see any risk to the plan to paying out benefits to the P since there is no QDRO. See IRC 414(p)(7)©(ii).

[jpod]

I think you'd be asking for trouble if you keep quiet and pay out the P's benefit as if there is no QDRO. Who knows, a judge may ultimately determine that it is a perfectly nice QDRO, notwithstanding what the Plan thought 13 years ago (judges sometimes do very strange things, and even more often they do the "right" thing even if they have to stretch the law a bit to do so). I find it hard to believe that the P, AP and their lawyers actually received a letter in 1993 and did nothing. So, either no such letter was actually sent, or there was follow-up and someone on the Plan's end of things dropped the ball. Some might say that the Plan and its fiduciaries have unclean hands by not being the slightest bit proactive in 1993 when it received no response, if in fact a letter was sent and received and there was no response. Also, it sounds like the Plan did not comply in full with all of the QDRO procedures, which raises issues for the Plan Sponsor and/or Plan Administrator under Title I of ERISA. I just can't see the harm in contacting everyone and resurrecting the issue (that is, of course, after you and your client undertake a thorough search of your files and records). As to the AP's current address, I can't imagine that finding it will be too difficult in this internet/Google age.

To fold your arms and sit back and say "we sent a letter, so we're in the clear" is not a good idea, in my judgment.

[Guest cac1134]

This is a huge plan. We get 10-12 DROs a month. Many languish for years without resolution. Many are pursuant to ancient divorces and filed only when the participant is ready to retire. My thought is that the divorce attorneys are paid at decree and don't always tidy up the lose ends. I know that happened in my divorce ... it's been two years and my DRO is not finalized and I know how risky that is! Ah, the shoemaker's children and all that!

[jpod]

If this is a huge plan and you get 12 Orders a month for this plan and you've experienced this before, why are you asking this Message Board what to do?

Just to be clear, was it a draft Order which was received 14 years ago, or a final Order? If it was a draft, I take back everything I said, assuming the Plan Sponsor/Administrator has reasonable confidence that there was no final Order received.

Assuming it was a final Order, and given that it's a huge plan, that presumably means it is a huge employer with deep pockets willing to risk having to deal with aggravation later. I guess if the employer is willing to take this risk, who am I to argue.

By the way, with large employers with worksites all over the place, I've found on many occasions that a DRO was handed to the local HR person at some far-off location who stuck it in a drawer and forgot about it. Could that be a possible scenario in this case?

[Guest mjb]

JPOD: What provision of ERISA makes the plan liable for paying out benefits to the AP in the absence of a QDRO approved by the plan administrator when the dro presented to the plan 14 yrs ago was rejected for the failure to comply w 414p? Many rejected dros are never resubmitted because a party has run out of funds or doesnt want the hassle of dealing with lawyers or the ex. Plans cannot force a party to submit a DRO. In any event under the doctrine of latches the plan would not be liable for paying out benefits to the participant after a 14 yr delay in resubmitting the DRO.

Under your logic the plan would never be able to pay benefits to the employee in the absence of a QDRO after a DRO is rejected which is inconsistent with 414(p)(7)©.

[Guest papillon]

JPOD: What provision of ERISA makes the plan liable for paying out benefits to the AP in the absence of a QDRO approved by the plan administrator when the dro presented to the plan 14 yrs ago was rejected for the failure to comply w 414p? Many rejected dros are never resubmitted because a party has run out of funds or doesnt want the hassle of dealing with lawyers or the ex. Plans cannot force a party to submit a DRO. In any event under the doctrine of latches the plan would not be liable for paying out benefits to the participant after a 14 yr delay in resubmitting the DRO.

Under your logic the plan would never be able to pay benefits to the employee in the absence of a QDRO after a DRO is rejected which is inconsistent with 414(p)(7)©.

I ran into this frequently with my ex wife. Over the course of having three attorneys - counsel would submit a deficient DRO - which the Plan admistrator would deem not qualified - and then I would wait... (In aggregate - this tied up my pension and 401K for about 4 years.)

The Plan advised (both myself and AP) that the lock on my account would continue for 18 months, after which - if no further correspondance was recieved - then the lock would be removed and I could direct the funds any way I wanted. The statutory basis for this rule is described here:

http://www.dol.gov/ebsa/regs/fedreg/final/...le-20070307.htm

The deadlock was eventually resolved when my ex-wife fraudulently had her own draft of a DRO qualified.... Roughly $14,000 was inappropriately removed from the 401K - and at the time I write this post - my ex wife is still in jail (going on 5 weeks) pursuant to a Civil Contempt charge for failing to return the funds.

Cheers,

Bjorn