Jump to content

Recordkeeper lack of account information as of assignment date


Guest anygig

Recommended Posts

Guest anygig

I have just run into a situation in which a DRO was approved as a QDRO, with a retroactive assignment/benefit split date of six years ago, which is fairly common for this particular plan. However, the 401(k) plan recordkeeper refuses to administer, stating that it is not legally required to maintain records further back than six years, and there was a change in recordkeeper five years ago, and thus, there are no Plan records to use for an assignment date earlier than the date of takeover. (Just as an aside, when the QDRO was approved, this information about recordkeeper administration was not known to legal counsel or the TPA.)

A couple of questions - (1) can a DRO be denied because the Plan has inadequate records related to the account balance as of the assignment or split date; and (2) is this common for recordkeeper's to not maintain adequate information beyond six years or due to taking over an account from a former recordkeeper?

I would also appreciate any comments regarding whether, going forward, the plan or QDRO procedures may be amended to refuse to approve DROs with retroactive benefit split dates. There may be a legal answer to that and I have not researched it yet. Even that change would not appear to address a situation in which a youngish participant has a QDRO for which a distribution is not available for more than six years because of no distribution event, such as severance of employment and or early retirement age. Comments about how to avoid this issue would be appreciated.

Thank you!

Link to comment
Share on other sites

The record keeeper is not required to do anything the record keeper has not agreed to do.

A domestic relations order is not qualified if it requires the plan to "provide any ... option" not otherwise provided under the plan. The full meaning of 414(p)(3)(A) is untested, but it suggests that the question becomes what is reasonable by way of plan record keeping. Can a plan reasonably keep no account balance records of any sort after six years. Other posts in other contexts have have advanced the idea that plan account records have to be kept longer in order to confirm benefits. Recocrd management can be accomplished in many ways, such as by contract with the former record keeper. But what records?

Let me suggest what would be resonable to expect, and maybe that will give you something to go on. It would be reasonable to expect that a plan would keep quarterly account balance records. Change in service providers would not excuse the record keeping requirements. If a date is chosen for a division of an account balance, the plan would use a proximate quarterly date either specified in the order or in the plan's default specified in the plan's written QDRO procedures. For example, the plan's default could be the next quarter balance on after the date specified by the order.

It is unreasonable to expect the plan to compute earnings and losses on the alternate payee's portion of the divided balance from the intial balnce to the present day, at least across a change in record keeping services. So the most a participant could expect is to be provided with a proximate quarter balance. The particpant will have to bring down the balance somehow to a date within the new recordkeeper's service, and then the new record keeper might calculate earnings and losses from that date to the time of distribution to the alternate payee.

Why are you not asking this question of the legal counsel involved in the determination of qualification of the order? And why did the plan adminstrator determine the order to qualified when the order could not be adminstered as approved? That is part of qualification.

Link to comment
Share on other sites

anygig, you just got as good an answer as you could hope for.

I recommend that you pass QDROphile's comments on to the Plan Administrator, who appears to have dropped the ball in couple of places in this story (and may not know it).

Link to comment
Share on other sites

There are many plans whose administrative procedures limit the time that they will retroactively split the participants account balance to a year on the grounds that longer periods are administratively burdensome. Other plans will splt benefits for a longer period if records are available but will charge the participant for performing the task.

mjb

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...