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Old DRO found not to be Qualified


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While cleaning up and reviewing old benefit files, we ran across a Domestic Relations Order (signed and filed with the courts) which appears to have been never completed. There is no indication that we ever accepted or rejected it. The DRO is clearly NOT Qualified. It simply appears that the final steps of the QDRO procedures were not completed.

Fortunately, the Participant is still an employee and the benefit is not in "pay status" yet. We are confident the divorce was finalized.

Has anyone ever ran across this? Would you contact the employee and ask for any paperwork related to this? The year of divorce was 1996.

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The plan was required to provide a notice of receipt of the domestic relations order and to determine qualification and provide a notice of the determination. The plan apparently has no evidence that it acted as required. Although late, it should now follow the rules. Rather than provide a separate notice of receipt, the notice of receipt and notice of determination can be combined. That will be a bit less embarrassing for the the plan. Get busy. The plan may have to deal with some of the consequences of tardy action, but it has to start somewhere and the rules provide the map for the start.

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The plan was required to provide a notice of receipt of the domestic relations order and to determine qualification and provide a notice of the determination. The plan apparently has no evidence that it acted as required. Although late, it should now follow the rules. Rather than provide a separate notice of receipt, the notice of receipt and notice of determination can be combined. That will be a bit less embarrassing for the the plan. Get busy. The plan may have to deal with some of the consequences of tardy action, but it has to start somewhere and the rules provide the map for the start.

What are the consequences of not acting? Under 414(p)(7) there is no requirement that a plan administator resolve the issue of whether a DRO is qualified in a specified period of time. If the issue of a DRO qualification has not been resolved within 18 months any benefit amounts segregated are to be paid to the participant as if the DRO had never been issued. Any determination that a DRO is a QDRO after the end of the 18 month period shall be applied prospectively to future benefit accruals.

mjb

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Notice about qualification is required to be given within a reasonable time. No time is specified by the statute. However, unreasonble delay could be a breach of fiduciary duty. Fiduciaries would want delay to be because of others, not the inattention of the fiduciaries.

The comments about the 18 months do not go into important details about how the 18 month rule works and the provisions of the 18 month rule about consequences for payments after failure to resolve qualification do not provide protection for fiduciaries.

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Notice about qualification is required to be given within a reasonable time. No time is specified by the statute. However, unreasonble delay could be a breach of fiduciary duty. Fiduciaries would want delay to be because of others, not the inattention of the fiduciaries.

The comments about the 18 months do not go into important details about how the 18 month rule works and the provisions of the 18 month rule about consequences for payments after failure to resolve qualification do not provide protection for fiduciaries.

Where does the OP state that notice was not given. How is the delay a breach of fiduciary duty? In my experience uncompleted DRO filings result from the failure of a party, usually the AP, to respond to requests by the plan admin to make changes to the DRO or a dispute between the AP and another party such as AP's counsel which results in the abandonment of the DRO, only to be revived many years later when the AP finds out the participant has retired or remarried. I have seen DROs abandoned after 5 years of fruitless negotiations by the parties.

One question I have for the OP is how did the DRO get in the files. Was it accompanied by a letter from counsel? One possibility is that the Plan Admin informed counsel that the DRO was not qualified and counsel failed to submit a revised DRO which explains why the final steps were never completed.

I thought the Legislative history of REA made it clear that after the 18 month period expires without a QDRO being issued any benefit acrual suspension ceases and any determination that a DRO is qualified after expiration of the 18 month period is to be applied prospectively. As noted in the Senate Finance Committee report on REA the AP always has a cause of action under state law for amounts paid to the employee that should have been paid to the AP. However the participant is still employed.

Since the DRO was issued 14 years ago there is a question of whether a court could issue a revised DRO.

Another Q :has the participant remarried?

mjb

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