Fiduciary duty of a Plan to the alternate payee

[Guest Chelsi]

What is the fiduciary duty of a Plan to the alternate payee?

I'm an AP to my ex's annuity plan. When I asked the plan to place an administrative hold on the account until they receive a court signed QDRO, the plan told me they only do that for 30 days at a time and for a maximum of 60 days. I asked what happens if that time passes and they court hasn't signed a QDRO and the participant retires and withdraws all the funds. I told them my ex will be retiring soon. The plan told me that they don't protect the AP's funds after the 60 days if they haven't received a court signed QDRO.

Is this a breach of the fiducuary duty to the AP?

Also, I asked for their plan procedures after a draft QDRO is submitted and they said they are not in writing but they could "tell" me their procedures.

Don't they have to file written plan procedures with the DOL?

Can someone shed some light on this? Thank you in advance.

[Guest BED]

The Committee Reports to the Retirement Equity Act of 1984 (H.R. Rep. 99-841 at page 858) contemplate the plan delaying the payment of benefits for a reasonable period of time if it receives notice a QDRO is coming. I suggest getting a restraining order from the divorce court if the plan is uncooperative. Cite the Committee report in the order.

[GMK]

Chelsi - The duty of the plan is to protect the participant's account.

Generally, when the plan receives notice of a forthcoming domestic relations order (DRO), the plan limits the participant's access to the funds for a limited period of time. After receiving the DRO, the plan will restrict distributions from the account while the plan determines if it is a qualifed DRO (QDRO).

Because people could play games with notifying the plan of a possible DRO in the works, the plan is not required to wait for the DRO for very long. I don't know if there is a minimum time.

This DOL site:

http://www.dol.gov/ebsa/faqs/faq_qdro2.html

verifies that a plan is required to have a written procedure for determining the qualified status of a DRO.

This DOL site:

http://www.dol.gov/ebsa/faqs/faq_qdro.html

says that the plan administrator is required to furnish you with a copy of the plan's procedure for determining the qualified status of a DRO (see "Who is the administrator of the plan?").

In the meantime, I would suggest focusing on getting the DRO drafted. And be certain that your notices to the plan are in writing. Phone calls are handy, but written documents carry the day.

It also usually moves things along if you ask the plan to review the draft DRO (before the judge signs it) to get the plan's opinion of whether there is anything in the draft that the plan cannot accept or if the plan wants any additional topics covered. Plans are likely to reject a DRO if the plan has to make decisions on how exactly to divide the account. In some cases, the plan may come back with a description of how it would divide the account if it receives such a DRO. You can then proceed on that basis or modify the DRO to specify how it is to be done, as long as the DRO does not require anything that is not already allowed in the plan.

QDRO's are not fun, but you can do it.

[QDROphile]

The law requires action upon receipt of a domestic relations order, not a draft, a warning, a premonition, a desire or a fancy. Somewhere in your divorce proceeding is a domestic relations order. It won't be a QDRO, but it will trigger the requirement for the plan to protect the potential alternate payee interest for a reasonable time pending correction of the qualifiaction defect. Do the plan a favor. Tell the plan that you know that the order will not qualifiy and it is for the purpose of protection pending submission of an order that is intended to comply with qualification requirements. Save the plan the trouble of sending you a disqualification notice. Then diligently proceed to submit an order that will qualify.

Sorry, the original text above is not clear. You will have to send the domestic relations order to the plan as a formality, even if you let the plan know it is excused from the qualification formalities other than protecting your interest. The best nonqualified order to send to a plan is one that mentions that the spouse will have an interest in retirement benefits, but the reference is not essential. No one knows what a reasonable time is, but the plan would be really stupid to use a short fuse. Your contact with the plan suggests that is is not too bright or helpful in this area.

[Guest Chelsi]

On top of it all, the plan can't do any calculations. They need a specific dollar amount or a percentage of the account value as of the valuation date.

Also, I am stuck with a divorce agreement which specifies that the AP's share is 50% of the amount that accumulated during the marriage plus loss/gains to date of distribution. The Plan would reject this language.

I have to either do a modification to the stipulation (with ex's consent) or if my ex doesn't cooperate, I have to ask for the court to decide a speciific dollar amount. I would also ask for a restraining order, since the plan won't keep the hold on the account past 60 days. This Plan is actually getting the funds from another Plan where my ex previously had his funds. The former Plan notified me that they are sending the funds to the other Plan in about 2 weeks. So, I want to wait until this Plan gets the funds before I send a draft QDRO and start the 60 day period.

BTW, two other plans that I am dealing with have indefinite holds on accounts pending distribution to the AP and are way more helpful than this fund.

Also, as QDROphile correctly points out, the person at this Plan that I am dealing with is not too bright, so that doesn't help the situation!

I agree with GMK that things should be in writing, but some Plans, as this one, seem reluctant to put things in writing, which would help me a great deal.

I wrote this Plan a letter asking them to confirm that they can't do calculations and therefore require a specific dollar amount or a percentage of the fund value as of the valuation date, and that the Plan doesn't keep records for more than 5 years (what they told me). But, all I got was a phone call with confusing information from the same person at the Plan and nothing in writing. The prior Plan had sent me all these items in a letter.

Thanks to all for the helpful info!

[GMK]

1. Follow QDROphile's advice.

2. Many plans do not keep older records.

3. Plans like DRO's that specify a dollar amount. I think your best bet, especially since you're dealing with a plan that apparently has not handled many if any QDRO's, would be if you and your ex can agree on a dollar amount (based on your ex's account records) that the judge would agree satisfies the '50% plus loss/gain' specification (yes, I know that's a lot of agreeing), and list that amount in the DRO.

4. Although I don't think it is necessary here, one way to document phone call information is to write a letter back to the plan summarizing the call, like: So-and-so (name, not 'this so and so') told me in a phone conversation on (date) the following information about the plan's QDRO procedures: 1. __ 2. __ 3.__ etc. Please let me know if any of these items is incorrect. Thank you.

Good luck.

[Mike Preston]

On top of it all, the plan can't do any calculations. They need a specific dollar amount or a percentage of the account value as of the valuation date.

[snip]

This Plan is actually getting the funds from another Plan where my ex previously had his funds. The former Plan notified me that they are sending the funds to the other Plan in about 2 weeks.

This explains why they can't do any calculations. All they know is the opening account balance. They don't have the historical information from the other plan. Perfectly reasonable.

I have a slightly different take on this, I think.

By refusing to provide you with written information, the plan has let you know that they intend to make this process less than transparent for you.

I think you should therefore not feel bad in the slightest about protecting yourself. By all means send along a copy of your settlement agreement and tell them that you are submitting it to them for their determination as to whether it satisfies the plan's definition of a qualified domestic relations order. At that same time, make a formal, written request for a written copy of the QDRO procedures. You will hopefully be provided with a document that tells you how long you have to cure a deficient DRO. My guess is that it may be as long as 18 months.

I would expect that you will receive the QDRO procedures shortly before you receive a formal rejection of the DRO as a QDRO. At that point, armed with the QDRO procedures, you will know the timeframe during which you must submit an acceptable DRO.

In the meantime, now that you know you absolutely must prepare a DRO that references a specific dollar amount, or a specific percentage of the amount that the plan initially received on behalf of the participant from the prior plan with gains/losses since the date of deposit, you can proceed to have that drafted, agreed and signed by the court.

Good luck.

[QDROphile]

With the new information, I agree you should let the plan go to the work of determining that that your decree is not qualified. That will force the plan to give you more information that will help draft a successful order. One thing that might change my mind would be information about processing or administrative fees that the plan would charge with respect to the orders and multiple determinations. Some plans do. Some don't. Some have a fixed fee, some impose fees that increase with with amount of work that is required.

[Mike Preston]

Ooooooh, good point.

But it flies in the face of reasonability to run into a plan that charges for this stuff but won't provide a copy of the QDRO procedures immediately.

It does bring up the issue, though, and the response to that issue is to get a copy of the plan's SPD where the charges, if any, should be laid out.