QDRO

[Gary]

An attorney prepared a QDRO and reported that the lump sum to be paid to the Alternate Payee was $300,000. It was intended to be based on 50% of the present value of the benefit accrued during marriage.

My understanding is that whatever the QDRO says is the amount to be provided to the Alt Payee and as the actuary for the plan I would compute an offset to the participant's benefit on a go forward basis for plan admin.

My question pertains to the accuracy of the benefit payable to the alt payee. That is, although I am not performing an actuarial valuation do I still need to review the accuracy or reasonability of the amount (especially to ensure that it does not exceed the total value of the benefit)? The accuracy or consistency between the intent to be paid and the value actually paid seems important to protect the participant and alt payee and to properly admin the plan.

So in conclusion, do I accept amount as correct, review for reasonability or review for accuracy?

Thanks

[david rigby]

Make sure it does not exceed the value of the benefit? Absolutely.

Make sure it complies with the rest of the document? Of course. For example, does the plan permit a LS distribution? Does the QDRO provide enough information for you to identify the participant's remaining benefit? (Just a hunch: no.)

Was the QDRO drafted by someone who thinks of all plans in a DC world? (Another hunch: yes.)

Has anyone already reviewed the DRO to make sure it is a QDRO?

[QDROphile]

You do what the plan administrator asks you to do, but you may need to explain the actuarial issues to the plan administrator so you can get proper instructions.

The plan administrator needs to be sure that the amount provided by domestic relations order does not exceed the amount (value) that the plan would pay to the participant, taking into account wneh the benefit is paid to the alternate payee. That could mean the the value of the accrued benefit is less than $300,000 now, but could be sufficient at the time of distribution. If that is the case, then the determination of qualification would have to be conditional and subject to contingencies.

The plan adminsistrator has to resolve any conflict between the $300,000 and 50% of the benefit (if there is a conflict), so you need to point out if the order has inconsistent descriptions of the alternate payee's benefit.

[AndyH]

Shouldn't this issue have been resolved before the DRO was accepted by the plan as a QDRO? Somebody should have made sure that it did not contradict the terms of the plan and was interpretable before this question developed. It should have said that either $x is paid or the pv of $x was paid. Before it became a QDRO, that is.

[QDROphile]

As AndyH points out, the questions relate to whether or not the order is qualified, which is why the plan administrator should be asking for assistance with the actuarial matters. The Plan adminstrator can't make a determination about qualification without resolving the questions.

[mbozek]

An attorney prepared a QDRO and reported that the lump sum to be paid to the Alternate Payee was $300,000. It was intended to be based on 50% of the present value of the benefit accrued during marriage.

My understanding is that whatever the QDRO says is the amount to be provided to the Alt Payee and as the actuary for the plan I would compute an offset to the participant's benefit on a go forward basis for plan admin.

My question pertains to the accuracy of the benefit payable to the alt payee. That is, although I am not performing an actuarial valuation do I still need to review the accuracy or reasonability of the amount (especially to ensure that it does not exceed the total value of the benefit)? The accuracy or consistency between the intent to be paid and the value actually paid seems important to protect the participant and alt payee and to properly admin the plan.

So in conclusion, do I accept amount as correct, review for reasonability or review for accuracy?

Thanks

I am not sure at what Q you are asking. In DB plans DROs are submitted to the plan's actuary before the plan administrator approves the QDRO to confirm that the amount awarded to the AP will not exceed the participant's accrued benefit and that the benefits can be paid under the terms of the plan.

If your Q is different, e.g., the attorney's assumption as written in the DRO that 300k was 50% of the accrued benefit is inccorrect, I dont know why you have any responsibility to correct it because under a DOL opinion letter the plan administrator is not supposed to look beyond the terms of the DRO as it was approved by the court but only focus on whether the DRO complies with the requirements of IRC 414p, such as the benefits are permitted under the terms of the plan.

In other words I dont think the plan admin would have any liability to the participant if under the plan's actuarial factors 300k was more or less than 50% of participant's accrued benefit because you were not asked to make such a determination but were given that amount as approved by the court in a DRO and according to the DOL the plan can rely on such a determination. I dont think the participant would have any claim against the plan or you if the 300k amount is incorrect but it would be wise if the plan administrator in approving the QDRO states in a letter to the participant and AP that the plan did not review whether 300k comprises 50% of the accrued benefit but is accepting the representation in the DRO that it is 50% of the accrued benefit.

[Gary]

I appreciate the well articulated responses.

I think I can better express the situation now.

The attorney prepared a draft DRO and forwarded to our firm the tpa to review the draft.

It's a one participant plan so the participant/administrator of course just relies on us the tpa in this case.

So as the actuary at the tpa I observe that the draft provides this value that is considered 50% of the PVAB and my thought was that (while I know that it is less than 100% of the benefit) I should do some due diligence re: the amount. And in doing so I requested to our internal consultant who would contact client's attorney that they provide us with the accrued benefit used in their calculation of PVAB and the coverture fraction used so as to enable me to review the reasonability of the amount.

The DRO draft also provides for an adjustment for certain expenses that are to be computed.

Once our firm approves the draft the attorney would finaize and submit the order to the court.

So to reiterate, does it seem necessary or prudent at a minimum to review the PVAB as indiacted above?

Thanks.

[mbozek]

I appreciate the well articulated responses.

I think I can better express the situation now.

The attorney prepared a draft DRO and forwarded to our firm the tpa to review the draft.

It's a one participant plan so the participant/administrator of course just relies on us the tpa in this case.

So as the actuary at the tpa I observe that the draft provides this value that is considered 50% of the PVAB and my thought was that (while I know that it is less than 100% of the benefit) I should do some due diligence re: the amount. And in doing so I requested to our internal consultant who would contact client's attorney that they provide us with the accrued benefit used in their calculation of PVAB and the coverture fraction used so as to enable me to review the reasonability of the amount.

The DRO draft also provides for an adjustment for certain expenses that are to be computed.

Once our firm approves the draft the attorney would finaize and submit the order to the court.

So to reiterate, does it seem necessary or prudent at a minimum to review the PVAB as indiacted above?

Thanks.

This is a tricky situation because the plan is not subject to the ERISA rules for reviewing DROs under DOL op./ 99-13A and the plan administrator and participant are the same person. I think having the consultant request the accrued benefit used in the calculation of the PVAB is the correct approach to review the amount. You need to have the attorney confirm what your responsibilities are in reviewing the QDRO, e.g., reviewing to see if the DRO conforms to 414p, or are you also being asked to determine if the calculation that the Alternate payee is receiving 50% of the PVAB is correct. Make sure you get the response in writing. Given the facts I think the attorney will want you to determine the accuracy of the assumptions.