QDRO for DB vs DC?

[SMB]

DC Plan client (I'm the TPA) forwarded a presumably "proposed QDRO" to me for initial review and input. First and foremost - I do not even begin to presume or purport to have the knowledge and/or experience to deem whether a "DRO" is qualified or not - but can usually point out any "glaring" issues - and then recommend forwarding "to counsel" for review and opinion.

Apparently, the participant's now ex-spouse (trying to save a few bucks) attempted a "do-it-yourself" QDRO and was able to get her attorney to file it with the court.

The proposed QDRO appears to me - at first blush, anyway - to contain language more pertinent to a DB Plan than to a DC Plan. I am posting this just for general feedback from the more learned and experienced of you out there.

Following is some of the language contained in the proposed QDRO (all "emphasis" has been added by me):

The Alternate Payee's award is payable for "the duration of the Participant's lifetime".

The Alternate Payee's interest in the Plan is to be determined by the following formula: A marital fraction multiplied by 50% and then multiplied by the Participant's "accrued benefit at benefit commencement".

The Alternate Payee's benefit shall be paid to the Alternate Payee in such form "as elected by the Participant" (?!) at the Participant's benefit commencement.

In the event of the Alternate Payee's death, either prior to or after the commencement of the Alternate Payee's benefit, the Alternate Payee's benefit "will revert to the Participant". (Sounds like a CSI - Pension Crimes Unit plot/motive to me!)

In addition, there are other references to "standard actuarial assumptions", "early retirement factors", "post retirement increases" - all of which lead me to believe that this is "way off base" for a DC Plan QDRO - or am I?

Thanks for any and all comments.

[david rigby]

You could be correct. Perhaps this is a "glaring issue", and it should be sent back?

[masteff]

I concur, all the items you've added emphasis to are DB relevant verbage that could make a real mess if applied to DC. Send it back.

[QDROphile]

There are other ways to skin the cat, but I applaud you for following Dirty Harry's advice and recognizing your own limitations. Rejecting the terms is the right course. But what is the plan administrator's policy about what is said in connection with advising that the terms of the draft order do not satisfy formal requirements? Will this lead to another failed attempt if the proponent is not given a clue? I am not at all suggesting that the plan should be helping with the terms of the order, but the plan could be wasting a lot of time if it plays tennis with someone who does not have an understanding of his/her own limitations.

[masteff]

QDRO's well put comment is why having your own model QDRO drafts can be a wonderful thing.

[SMB]

QDROphile,

Thanks - you provided me with a natural segue to a follow-up question, as I suspect that when I contact the Alternate Payee's attorney regarding the proposed QDRO that she will naturally ask if the Plan has a sample QDRO format (which it does not, nor do I) that she could use.

My question - has anyone ever used one of the "flat fee" QDRO preparers (family law attorneys, retired judges, etc.) who advertise their services on-line? If so, how was the "experience" and woiuld you recommend?

[GMK]

FWIW, when you contact the Alternate Payee's attorney include copies of the Plan's SPD and its QDRO Procedure to give the attorney a framework of what distributions the Plan allows (and the QDRO cannot require benefits that the Plan does not already offer).

I would avoid offering a "sample QDRO" form, because one size does not fit all. What has worked for us is to have the attorney send a draft DRO (after receiving the SPD and QDRO Procedure). The attorney knows the settlement details and usually comes very close to wording the DRO so that it is acceptable to the Plan. Of course, it is important to have the Plan's attorney review the draft DRO.

Regarding your CSI comment, at a minimum you will save yourself some administrative headaches if a document (the Plan, the QDRO Procedure, or the QDRO) specifies what happens if the Alternate Payee or Participant should die before the distribution is made to the Alternate Payee.

If you haven't already done so, I suggest that you review the other posts on this QDRO board. QDROphile and others provide keen insights into the many nuances of QDRO's.

[J Simmons]

Count me in GMK's camp of the plan and plan administrator not offering a 'sample QDRO'. Divorce attorneys drafting from samples draw many assumptions many assumptions from what is and is not in the sample that are not necessarily correct about the plan, the benefits, and the payout options offered.

[QDROphile]

I discourage plans from providing model or sample orders. Good written QDRO procedures can be helpful to everyone.

[Guest Sieve]

SMB --

Some of the QDRO preparers do a good job. They obtain necessary information and draft accordingly. In any event, that's the obligation of the parties to the divorce/separation, and all you can do is to recommend that they seek someone like that. Or send them to the EBSA website. (And I agree that you should not prepare a "model" QDRO.)

Meanwhile, much of what you mention is certainly not inappropriate for a DC plan if in a QDRO, and I have seen all of them in DC plans: e.g., determining the Alternate Payee's interest in the Plan by the formula method (a marital fraction multiplied by 50% and then multiplied by the Participant's accrued benefit--i.e., vested account balance--at benefit commencement); the Alternate Payee's benefit being paid in the form elected by the Participant at the Participant's benefit commencement; the Alternate Payee's benefit reverting to the Participant in the event of the Alternate Payee's death prior to or after the commencement of the Alternate Payee's benefit.

So, before rejecting the QDRO outright, I would first determine if it is appropriate as written after ignorning those items which obviously do not/cannot apply. The rest may be sufficient (or almost so). And, remember that you are not there to protect one party from his/her non-attention to detail or inadequate attorney or lack of attorney, but rather to make certain that there is a valid QDRO which can be followed and which, if payments are made pursuant to the QDRO, will not disqualify the plan.

[SMB]

Thanks to all of you who took the time to respond. Your input is valued and much appreciated.

SmB