Shared Payment/Shared Interest?

[Guest cac1134]

Alternate payee proposed draft DRO to Fund. Participant not in pay status, so DRO creates a shared interest. Fund requested changes. Things stall. Now, Participant submits papers to retire effective Dec. 1. Alternate payee wakes up and has counsel prepare to enter revised DRO and get certified copy approved by Fund. The next Fund Trustee meeting is mid December.

Does the Order fail because now participant is retired and in pay status so we need a shared payment?

Can Fund follow order in that break between December 1 and when the first check is cut and preserve shared interest?

Plan Document says an DRO is not a QDRO until Fund Trustees approve.

What say you?

[QDROphile]

The plan can postpone the determination of the retirement benefit for a reasonable period to resolve qualification issues. It is up to the fiduciary to decide whether to evaluate the domestic relations order based on pre-retirement circumstances or post- retirement circumstances. The decison should take into account the communications that have occurred, plan terms and policies and the writen QDRO procedures and the policies reflected in them. The fiduciary will probably have to read between some lines. As for policy considerations, adverse selection lurks generally in the background.

My personal preference is to disregard draft domestic relations orders. They have no legal effect unless the plan gives them effect (e.g. under terms of the QDRO procedures). Under my approach, the domestic relations order would be evaluated based on the circumstances at the time of delivery. You make it sound as if the order will arrive after the benefit is in pay status.

I don't see how the Fund could request changes in the first place. The Fund should limit itself to advising if the proposed form of the order meets qualification requirements. If the Fund engaged beyond its appropriate role, the Fund may have compromised itself and may have to act differently because of its prior actions.

[Guest cac1134]

The draft was bounced due to qualification defects. My position is that the DRO is not a QDRO until approved by the Fund which will happen after the participant is in pay status. The Fund cannot approve the DRO as a shared interest any longer, so it it again bounced back to attorneys for revision. This only seems complicated because the timing is so tight.

[Effen]

Seems to me that since the fund knew a DRO was in the works, it should not have commenced payments to the participant. I'm not sure of the sites, but I believe it should have escrowed the payments for a reasonable time until the DRO issues were resolved.

Also, did the plan get spousal consent to start the payments to the participant or did they hang their hat on the "he is single" hook?

What ever you do, make sure the fund's counsel is on board.

[Guest mjb]

How much time elapsed between the time the dro was rejected and then resubmitted?