Multiple Child Support QDROs for 1 PPT

[Guest ggbrock]

Our DB Pension Plan has a PPT who will soon hit his early retirement date under the Plan and who currently has 5 QDROs properly entered by the court and qualified by the Plan over the course of the last several years. 3 of the 5 QDROs relate to the same Alternate Payee, which in this case is the PPT's child. All of these QDROs allow the AP to receive her benefit at any time after PPT's early retirement date under the Plan.

PPT calls Plan to request his early retirement benefit. When informed that his benefit is frozen due to the 5th and final QDRO (which is currently being processed), he claims that he never received ANY of the QDROs, nor did he receive the accompanying Determination Letters sent by the Plan qualifying the Orders. All QDROs and letters were sent to the most recent address the Plan has on file for him (which he claims is very outdated).

PPT claims that 3/5 QDROs referred to above "are wrong" and that he doesn't owe nearly that much in child support. We explain that the Orders met the requirements of ERISA, were duly qualified by the Plan and sent to his most recent address on file. We explain that AP can get money at any time after his early retirement date unless he sends us an amended court-entered order before that date (which is unlikely at this point).

Does anyone think that Plan can justifiably withhold payment to the AP for a certain period of time (say, 30 days) to give PPT an opportunity to get a revised court order? But then, what if he continues to request extensions? And what if AP demands payment? My first thought is that the Plan may be better off complying with court-orders that tell Plan that AP can get money at any time and leaving them to battle it out themselves. What are your thoughts? Thanks very much.

[QDROphile]

The participant should be given a reasonable time to assert a claim for benefits and that should be done under the plan's claims procedures. If the participant can get orders from the state court to the effect that the orginal QDRO's are stayed until resolution, that will give the participant more time; the consideration of the claim can be affected at least to some degree by the procedural posture of the state proceeding. The claims procedures are not for the purpose of arguing the substance of the orders; the claims procedures are part of the fiduciary duty to assure proper payment of benefits. If the participant cannot get the state court to hold the orignal orders in abeyance while the state court considers the state law aspects of the claim, the plan should proceed with distribution in accordance with the claims procedures. The plan will want to examine its records concerning notice of qualification. It sounds odd that the address would be seriously obsolete and yet there are repeated failures to be notified that the notice was undelivered. The speed of processing the fifth order can also affect the timing of all the payments. The considerations will also be affected by the plan's policies about revising benefits after the start of payment -- the plan could make payments pending resolution of the stat court issues and then revise benefits later in accourdance with the resoultions, but that will involve some very serious and complex decisions.

[My 2 cents]

Brainstorming here:

1. Are the three QDROs with the same AP supposed to be additive or does one succeed the other?

2. Not much you can do if the participant does not keep you up to date on his address. He is charged with a duty to do so, and if his failure to keep your records up to date costs him, that's his fault not yours.

3. Depending on circumstance, you may need to interplead the benefits - turn it over to a court having jurisdiction, presenting the conflicting claims and letting the court make the decision.

Were they all issued by the same court? If so, you might check back with that court to find out if the orders are still considered to be in effect. If they are, whether the participant is happy about them or not is not a concern of yours. Child support that the participant is reluctant to provide is why there are QDROs, after all.

It might not be advisable to pay out while it is under dispute, but if courts have chopped up the participant's benefits, giving them to someone else, how much difference would it have made if the participant had received notice? If you mailed everything to the most recent address on record, have you not fulfilled your administrative obligations?

[Guest Matthew Gouaux]

Take a close look at the child support QDROs to see if they are valid only if the participant is in pay status as of the date of the order (or enters pay status within a specified period after that date), and to see if any of them revoke one or more of the others. It's not uncommon for courts to to update child support QDROs to reflect the current arrearage or an increase or decrease in the periodic child support payment.

As for the withholding issue, as 2 cents stated, it's usually best to not pay out benefits that are in dispute.

Also, I agree with QDROphile that you should follow the plan's claims procedures (and QDRO procedures to the extent applicable). Whether or not you sent correspondence to the wrong address, the participant should be afforded an opportunity to show that the plan should not follow the QDROs.

[Guest bobolink]

I am not sure how it cuts in the QDRO situation, consider the new case from the ND of Oklahoma, Foster v PPG Industries. There, terminated participant gets divorced and does not notify plan of change in address. Plan required deferred vesteds to keep addresses up to date. Ex spouse changed participant's access information and withdrew $42K. (!!!) Participant makes a claim to have the plan restore the money. Plan denied claim. Court affirms the denial, finding plan followed the terms of the plan and was not arbitrary or caprecious. The loss was due to Participant not changing address and ex-spouse fraudulent conduct.

Here I assume the plan would pay out under the terms of a qualified dro in accordance with plan terms. If P files a claim for those benefits covered by the qualified dros, the plan could determine in a non-arbitrary or caprecious manner to deny the claim and pay out in accordance with the qualified dro. If he submits a proposed dro which supercedes the existing ones, then the qdro rules would suspend distribution for the determination period.

[Guest ggbrock]

Thanks for your thoughts.

In response to QDROPhile, an issue that always comes to mind is when does a dispute over a QDRO turn into a claim for benefits under the Plan? I guess, by your analysis, his contesting of the amount of the child support to be assigned from his Plan benefit constitutes a claim for benefits under the Plan, which the Plan will deny based on the terms of the current court orders and allow him a reasonable time under the Plan's claims procedures to appeal (and get a new state court order). This seems like a reasonable approach to me.

In response to My 2 Cents, these are good ideas as well - I will call the court to check on the validity of the court orders from their perspective. (Yes, all three were from the same court). Also, they are additive, in that, each subsequent QDRO mentions the prior QDRO and is clear that the subsequent QDRO does not in any way supersede or affect the prior QDROs.

Even if we do handle PPTs claim under the plan's claims procedures, I'm still concerned with how this affects AP's separate right to her portion of the benefit on or after PPT's early retirement date, pursuant to ERISA and valid state court orders. If she demands payment, what legal basis does Plan have for denying it? You are correct that 5th QDRO will take some time; however, that would not stop her from receiving the portion of the benefit she was owed under the prior QDROs. (Unless I'm missing something??) But, in any event, the Plan's preference would be to not pay out benefits right away, but trying to figure out the proper way to approach this in light of valid QDROs.

[QDROphile]

The participant's claim for benefits is not a challeng to the amount of child support. The participant's claim is that his benefits have not been correctly determined because of some mistake in interpretation, qualification or application of the domestic relations orders.

A plan administrator should not be checking with a state court about status or substance of orders. Once that happens, the administrator is not going to be able to draw appropriate lines around the plan's responsibilities and duties. I do not think this matter is an exception.

Just as the claim is a device for delay to allow a legitimate challenge to the state court procedural matters, the processing of the 5th domestic relations order is a device for delay to get questionable matters resolved within a reasonable time frame and the applicable standards. Especially for a DB plan, one would expect, or at least consider, that all of the QDROs must be taken together to determine the correct effect on the alternate payee's benefit and the participant's benefit. Once a benefit goes into pay status, it is not usually modifiable. It is very difficult to get at what is going on with the orders and the plan apart from the participant's assertion, but I would take a closer look at some of the basics of QDRO administration in what is a complex situation even without the particpant's claim.

To put it in very blunt and direct terms, the plan needs an excuse to give the particpant a reasonable time to get the state court to do something to put the brakes on the effectiveness of the court orders. If the plan is lucky, the court will suspend the orders while the participant pursues his issues with the state court, and some clarifying order will eventually be issued. If the particpant fails to get some sort of immeditate suspension, which is likely, then the plan will have to examine its own behavior in the process, which won't be comfortable. For example, I am still stuck on how the plan now thinks the address for the participant was obsolete and yet got no indication of failure to deliver multiple notices about the QDROs. Plus the plan will have to rethink its interpretation of the orders and its determination that the orders were, in fact, domestic relations orders. For example, were all of the orders certified as correct copies by the court clerk (a filing stamp does not count!)?

A final oservation: What do you think a deadbeat dad is really going to do by way of going into court on the subject of overdue child support?

[david rigby]

The original post implied, but did not state, that the participant is a VT. However, if the participant is actively employed, then the confusion over address may not be the fault of the participant.

[mbozek]

Our DB Pension Plan has a PPT who will soon hit his early retirement date under the Plan and who currently has 5 QDROs properly entered by the court and qualified by the Plan over the course of the last several years. 3 of the 5 QDROs relate to the same Alternate Payee, which in this case is the PPT's child. All of these QDROs allow the AP to receive her benefit at any time after PPT's early retirement date under the Plan.

PPT calls Plan to request his early retirement benefit. When informed that his benefit is frozen due to the 5th and final QDRO (which is currently being processed), he claims that he never received ANY of the QDROs, nor did he receive the accompanying Determination Letters sent by the Plan qualifying the Orders. All QDROs and letters were sent to the most recent address the Plan has on file for him (which he claims is very outdated).

PPT claims that 3/5 QDROs referred to above "are wrong" and that he doesn't owe nearly that much in child support. We explain that the Orders met the requirements of ERISA, were duly qualified by the Plan and sent to his most recent address on file. We explain that AP can get money at any time after his early retirement date unless he sends us an amended court-entered order before that date (which is unlikely at this point).

Does anyone think that Plan can justifiably withhold payment to the AP for a certain period of time (say, 30 days) to give PPT an opportunity to get a revised court order? But then, what if he continues to request extensions? And what if AP demands payment? My first thought is that the Plan may be better off complying with court-orders that tell Plan that AP can get money at any time and leaving them to battle it out themselves. What are your thoughts? Thanks very much.

ERISA 101: If plan is required to provide notice of the QDROs to PPT, Plan needs to be make sure it has proof notice was provided.

How was the PPT notified of the 5 QDROs?

Did the plan send notices via certified mail, return receipt requested?

Does the plan have a record of receipt of the notices by the PPT?

Were any of the 10 notices returned as undeliverable?

Did the plan follow the plan procedures for providing notice?

IRC 414(p)(2)(A) requires that the QDRO specify the PPTs last known mailing address. The legislative history of IRC 414(p) states that the notices required under 414(p)(6) are to be sent to the addresses specified in the domestic relations order or to the last known address of the participant if the order fails to specify an address. Were the notices sent to the PPT's address specified in the order? Note: Your post states that the orders and notices were sent to the most recent address that the plan has on file for the PPT- Is this the same address as his address in the domestic relations orders?

[My 2 cents]

I question whether the plan has to prove they were received - the plan should have sent the notice concerning approval of the DROs to the most recent address on file (especially if not in conflict with an address in the DRO or DROs). Proof of mailing is a good idea, proof of receipt is even better but the plan need not conduct a diligent search at the time of notice if the letter is returned with no forwarding address or not deliverable. They will have met their notice obligation. A requirement that the plan provide notice is not the same as a requirement that the plan ensure that the notice was received. Reasonable efforts suffice.

If the participant notifies the plan that there is a formal challenge being made concerning the court orders, then some sort of delay may be acceptable, but note that unless the court proceeded without his involvement, what are the chances that there will be a reversal of issued court orders? Especially since they concern child support and not alimony.

[mbozek]

I question whether the plan has to prove they were received - the plan should have sent the notice concerning approval of the DROs to the most recent address on file (especially if not in conflict with an address in the DRO or DROs). Proof of mailing is a good idea, proof of receipt is even better but the plan need not conduct a diligent search at the time of notice if the letter is returned with no forwarding address or not deliverable. They will have met their notice obligation. A requirement that the plan provide notice is not the same as a requirement that the plan ensure that the notice was received. Reasonable efforts suffice.

If the participant notifies the plan that there is a formal challenge being made concerning the court orders, then some sort of delay may be acceptable, but note that unless the court proceeded without his involvement, what are the chances that there will be a reversal of issued court orders? Especially since they concern child support and not alimony.

While you are correct that the plan only has to provide that the notices were sent, if the letters were sent by first class mail keeping the letters/envelopes which were returned as undeliverable is irrebutable proof that the letters were sent to the correct address when the employee is contending that he did not receive them because they were sent to his old address. Also I think the plan is required to send the notices to the address listed in ithe DRO, not the most recent address listed on file because the plan may not have the current address of the participant which will be in the court records. If the address listed in the plan's records is incorrect then the plan failed to deliver the notices as requried under 414(p) which will create complications. The plan complies with the notice requirement of 414(p) if it uses the address in the DRO.