Slow processing of QDRO cost me 17%

[Guest bookseller]

Hello-

In late July I received a QDRO as part of my divorce settlement. My ex had no cash to pay his settlement, so I agreed to accept a lump sum of $108,000 from his pension. I received a letter from the administrator in late July 2008 that they had received the order and were verifying it, and that they would be in touch as soon as a decision had been reached, typically within 60 days. It said if there was a delay, I would be notified and told why. It stated that once an affirmative decision was made, the funds would be segregated and arrangements could be made for transferring them (basically). I heard nothing and heard nothing, and finally contacted in mid-January 2009 to request the distribution. I sent another copy of the QDRO. Still heard nothing. Inquired this week, and received a letter saying they could not execute because the value of the account that this money was coming from had fallen to $91,000. They want me to submit an amended QDRO saying that this amount will be acceptable, or that this amount and some other arrangement is acceptable. What went wrong here, and am I going to need a lawyer to figure this out? I need this money to pay my lawyer from my divorce action, and this lawyer likely will not be interested in performing more work as I owe them $4500. I live in Pennsylvania. Please give me some direction!! Thanks so much.

[K2retire]

The plan cannot pay you more than the value of your ex's account.

The first direction you should be looking is to get legal help. Why they took so much longer than the expected 60 days is your first question. That answer may point you to other options.

As they suggested, it may be that you have to look to other marital assets to come up with some of the additional funds you were expecting.

[GMK]

K2retire has it right. The Plan cannot pay out more than the account balance.

You can write to the Plan requesting a copy of the QDRO Procedure and a copy of the Summary Plan Description. Those documents provide information about the steps for making and appealing your claim. (Your request should be in writing.)

It sounds as if there is no problem with the QDRO except that the amount now exceeds the available balance in the account. That raises the question of why the plan did not report to you that the DRO was qualified and make the distribution last September (60 days after you filed the DRO), when the full amount was presumably available. The Plan may have a reasonable answer, but the question is worth asking.

If you decide to modified the QDRO, don't settle for $91,000. Word it something like that you get $108,000, or if less, the entire account balance. As R2retire also points out, you will need to work out something else with your ex to get the rest.

[BG5150]

On a side note, I believe the plan administrator has 18 months in which to qualify a DRO. Seems kinda long, but I think that's the timeframe.

[QDROphile]

The plan sponsor does not determine qualification, the plan administrator or other fiduciary has that responsibility. The fiduciary must determine qualification within a reasonable time. Absent unusual circumstances, 18 months is not reasonable. Also, pending the determination, a lot of plans provide for segregating an amount that would be payable to an alternate payee if the order is determined to be qualified and investing it in an investment that has low risk of loss. That is why the earlier posts advised to collect all the relevant information. The fiduciary may have fallen short of the plan's own standards for processing.

[BG5150]

The plan sponsor does not determine qualification, the plan administrator or other fiduciary has that responsibility.

I edited my post.