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QDRO: Accept Or Not


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MEP A spun off single employer plan B eff 1/1/12. PA of Plan B receives QDRO with a date in 2011 as the date of property settlement and stating that earnings will calculated as of a date in 2011.

PA of Plan B has no authority or resources to calculate earnings prior to the plan effective date in 2012. Can Plan B resolve this issue through negotiation with legal counsel for participant and AP or is it a more prudent course of action to reject the QDRO and request a modified order?

We are the TPA advising the PA on the acceptability of the QDRO. Thanks for your comments and perspectives.

PensionPro, CPC, TGPC

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Aggressive proposal (but what I would do): Order is qualified under an interpretation that the AP's interest will be determined and effective 1/1/2012, with earnings calculated on the amount from 1/1/2012. If anyone disagrees with the interpretation they must notify the PA within whatever time is appropriate under the plan for claims. No distribution to AP until the deadline. If someone objects and will not back off when informed of the consequences, then the order will be disqualified, because, by golly, that interpretation was really wrong but the order, as properly interpreted, would require the plan to do something that the plan is not designed to do. Personally, I think plan B should try to get MEP A to calculate the pre-2012 portion and plan B can take it from December 31, 2011 forward. At least ask.

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I would advise rejecting the order since you cannot execute the order as it stands. Your rejection should include the reason and a suggestion that the calculation be done from 1/1/12. You have to be responsive to the order. Otherwise you end up with a headache because you did not comply with the order as written.

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Thanks for the responses. As much as the PA would like to accept the QDRO to avoid additional legal fees and rigmarole the issue for the PA from the compliance standpoint is the risk of not following the letter of the court-approved QDRO. The QDRO is clearly flawed in that it is asking the PA to do something that the PA can not. We are in consultation with the parties involved to determine if they can propose a legal solution that would alleviate the risk for the PA. After all the sticking point only relates to earnings for less than a year in a DC plan.

The issue would have been avoided if the attorneys for the participant and AP had consulted the PA prior to finalizing the order, which I thought was customary. Incidentally, the QDRO could have been more meticulously drafted. It lists the custodian of plan assets as the PA but the PA is willing to overlook these details of lesser importance.

Edited to Add: Part of the discussion involves requesting PA of prior plan A to provide earnings calculation for 2011 as a professional courtesy. Thanks QDROphile for that recommendation!

PensionPro, CPC, TGPC

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