QDRO Expenses

[BTH]

In your experience, what is a typical charge to a participant's account for the determination and processing of a QDRO?

$200?

$400?

More?

Thanks.

[rcline46]

Collusion, price fixing, restraint of trade. Fees are not a good thing to discuss on a bulletin board.

[BG5150]

Ours is "hourly rate based on the complexity of the order." You can do the math using your firm's ad hoc pricing.

One that says "pay $20,000" is easier than "pay 1/2 of acct balance as of January 8, 2009" which is easier than "pay 1/2 of account balance plus investment experience thereon as of October 23, 2003."

[Peter Gulia]

rcline46 is wise to remind us that those who enforce fair-competition laws (and others) might pick up on an Internet conversation.

But consider that much of the information might be readily available. One might ask people among your family and friends to share with you the summary plan description, summary of material modifications, 404a-5 information, and other disclosure documents they received from other retirement plans.

You might want to study how different sets of lawyers and businesspeople solved the same exercises. Along the way, you'd see some descriptions about how plan-administration expenses are allocated to an individual's account.

[mbozek]

fee quotes are available online and vary by locale. No need to ask. Just google qdro legal fees by attorneys.

http://www.stanbeutlerjd.com/faq-fees.php

http://www.qdro-law.com/fees/

or google QDRO plan administrators fees

http://www.qdroplan.com/pages/AdminFees.html

[BTH]

Thanks for the info & links.

My main concern is that any charge to the participant be considered "reasonable" by the DOL. Unlike usually set charges for loans or distributions, the amount of time involved in a QDRO determination can vary quite a bit. Since it doesn't appear that the DOL has any guidance on what is considered a reasonable expense for a QDRO, was just trying to get a sense of that.

[Bill Presson]

We bill by the hour. A lot depends on the familiarity of the attorney drafting the DRO and whether they send it to us for review before getting it signed by a judge.

[GMK]

Some proposals we have seen quote a flat fee, which is for processing the distribution and doing the record keeping of an already Q-ed DRO.

Most quote an hourly rate or a minimum fee (no max, depends on complexity) or a combination of hourly and minimum. This seems to me to be the most realistic approach when there's no way to know or estimate the amount of work involved.

[mbozek]

Thanks for the info & links.

My main concern is that any charge to the participant be considered "reasonable" by the DOL. Unlike usually set charges for loans or distributions, the amount of time involved in a QDRO determination can vary quite a bit. Since it doesn't appear that the DOL has any guidance on what is considered a reasonable expense for a QDRO, was just trying to get a sense of that.

Price quotes vary depending on the difficulty in doing the computations, locale where the services are performed, type of plan, amount of work to be preformed, etc.

I have reviewed QDROs where the parties wanted the DC plan administrator go determine last 6 years of valuation in multiple accounts in DC plan in order to retroactively divide up the plan assets. PA can either say no or come up with the value for the costs to be billed to the participant. One thing that needs to be recognized is that plan must be made whole for value of services performed by TPA/attorneys in determining the QDRO valuation.

[QDROphile]

"One thing that needs to be recognized is that plan must be made whole for value of services performed by TPA/attorneys in determining the QDRO valuation."

Please elucidate. Are you saying that out-of-pocket expenses relating to QDRO administration cannot be included in the general expenses of plan administration and allocated across all accounts the same as, for example, auditor's fees?

[mbozek]

QDROphile said:

"One thing that needs to be recognized is that plan must be made whole for value of services performed by TPA/attorneys in determining the QDRO valuation."

Please elucidate. Are you saying that out-of-pocket expenses relating to QDRO administration cannot be included in the general expenses of plan administration and allocated across all accounts the same as, for example, auditor's fees?

Please elucidate what you mean by QDRO admin fees. Some fees which pertain to a QDRO such as the cost to set up the account should not be charged if there is no charge to set up an account for a non QDRO beneficary. If the plan has an account admin fee that is charged to all non active employees then such a fee could be charged to an AP's account.

Admin expenses to facilitate the valuation and division of the participant's assets to comply with the terms of the QDRO would be included in the fee billed to the participant. Fees that would not be charged to other beneficaries should not be included in the cost of the QDRO.

[QDROphile]

Plan incurs $600 of legal or actuarial expense in interpreting and processing the order to determine qualification and the alternate payee's benefit.

Must the plan charge the participant/alternate payee anything other than a prorata share of the $600 as a general administrative expense that is shared with all other accounts in the plan? Assume that all QDRO administrative expenses are treated the same. No participant/alternate payee is charged the entire $600 (or the actual expense, whatever it is).

If the plan has a fixed fee of $500 for processing that is charged to the participant/alternate payee account, can the plan charge all accounts the additional $100 as a general administrative expense as described above?

[mbozek]

Plan incurs $600 of legal or actuarial expense in interpreting and processing the order to determine qualification and the alternate payee's benefit.

Must the plan charge the participant/alternate payee anything other than a prorata share of the $600 as a general administrative expense that is shared with all other accounts in the plan? Assume that all QDRO administrative expenses are treated the same. No participant/alternate payee is charged the entire $600 (or the actual expense, whatever it is).

If the plan has a fixed fee of $500 for processing that is charged to the participant/alternate payee account, can the plan charge all accounts the additional $100 as a general administrative expense as described above?

If the DC plan expenses solely to process the QDRO are $600 then that amount should be billed to the participant b/c otherwise the unbilled expense would be allocated among all of the other participant's accounts. Of course, employer could pay any QDRO costs not charged to participant. I dont believe that a plan should allocate a portion of the expense of a QDRO review to other participants who derive no benefit from this expense any more than the cost of processing plan loans or administering directed brokerage accounts should be allocated pro rata to the accounts of participants who do not use those services.

[QDROphile]

I agree that a plan may allocate expenses relating to a particular account to that account and perhaps should allocate that way. I am unaware of any authority that compels precise allocation to the source of the expense. In fact, many plans do not allocate administrative charges for QDROs to the account of the participant/alternate payee, and the employer does not necessarily cover the expense either. Is there authority to the effect that that QDRO expenses cannot be allocated as a general expense, and thus effectively be borne by all particpants?

[mbozek]

I agree that a plan may allocate expenses relating to a particular account to that account and perhaps should allocate that way. I am unaware of any authority that compels precise allocation to the source of the expense. In fact, many plans do not allocate administrative charges for QDROs to the account of the participant/alternate payee, and the employer does not necessarily cover the expense either. Is there authority to the effect that that QDRO expenses cannot be allocated as a general expense, and thus effectively be borne by all particpants?

Only the general fiduciary rules for acting prudently paying reasonable plan expenses. In Tussey v. ABB Inc. a court held that among other imprudent acts the trustee and recordkeeper breached their fiduciary duty by transferring float income earned on plan assets to plan investment options rather than distributing it to plan participants. My own view is that given all of the scrutiny of plan expenses and fees paid by participants and litigators, plans should exercise an abundance of caution in determining how expenses are allocated to each participant's account. I do not think it would be prudent to allocate the admin costs incurred in directed brokerage accounts to those plan participants who do not utilize that investment option.

See link to comments on ABB case:

http://www.employeebenefitslawreport.com/2...ssey-v-abb-inc/