QDRO Earning Calculation

[JohnH]

Hi,
Can someone tell me how to calculate the gain/loss of profit sharing 401k plan,when we do not have the statements to calculate it from? Is there any historical annual interest we can use? Thanks.

[Mike Preston]

No. No.

[ESOP Guy]

The plan administrator is supposed to keep these records.

Do you represent the plan or the person getting the QDRO?  If you are the person getting the QDRO talk to the plan and see if they have the records.  By the way they are supposed to do the computation.  If you represent the plan talk to the people who help you administrate the plan.  See if you can get the records you need. 

[hr for me]

I'd ask what person you are in the situation and agree with ESOP Guy.

What time period are you looking at? 

 

[JohnH]

Hi,

Well, here is the long story. I am the Participant of the profit sharing plan, and when we divorced (Nov 2009), the divorce judgment stated that my ex-wife entitles $35,000 portion of my 401k (it was with Jhancocks), without any further information about gain/loss. Then, in June 2014, the plan is moved to OneAmerica.

Unfortunately, I lost most of my statements when I moved. So, I called JHancocks, requesting a copy of the statements, and the said they do not have copies older than 2 years. So, I am missing most of the statements from Nov 2009 to Jun 2014.

My ex-wife prepared a QDRO with her CPA and since we do not have complete statements they are basing the gain/loss calculation from the historical S&P500.using DQYDJ website to calculate from Nov 2009 to Jun 2014.

I am wondering if they are using the right tools to calculate the gain/loss. According to their calculation her $35K portion has grown to $68K during those 5 year period.

Any inputs is very helpful. Thanks.

[Mike Preston]

Nobody here can provide you with the advice you are seeking.  At one end of the spectrum you can, obviously, just accept the ex-wife prepared DRO.  At the other end of the spectrum you can engage an attorney in your jurisdiction to see if they feel that the ex-wife prepared DRO should be modified and, if so, how.

Good luck.

[ESOP Guy]

We need to back up here a bit.

Was the QDRO approved by a court?  When? 

Was the QDRO submitted to the plan back in 2009?

Did the plan accept the QDRO?  When? 

The account should have been split back in 2009 when the QDRO was submitted and approved a good by the plan administrator. 

Some thing sound off here.  A splitting of 401(k) benefits in a divorce decree isn't enough.  There had to be a QDRO approved by the courts. 

[hr for me]

your employer should have better records. Have you contacted them?

Was the QDRO not given to the employer/plan back in 2009? That is when it should have been split out and earnings would have grown separately?  Curious that it took 7 years to get the QDRO done -- but hindsight is 20/20 and now the calculation is more difficult as you have found.

S&P 500 would be higher than $68K.  But I do agree that I would try to do actual earnings as much as you can because there is no guarantee that you actually earned as well as the S&P500 did.

 

[ESOP Guy]

I would ask your employer if they have the annual reports going back to 2009 which would include your account balance data for those years.  The two companies you name would send an annual summary report of everyone's balances to your employer as the plan sponsor. 

If they are good at keeping records they might have the data

 

[GMK]

Many (too many?) DRO's take too many years to be filed.  Just the way it is.

No question that the Plan Sponsor (usually the employer) should have all the records. Call or write to them immediately.  Of course, participants can keep their copies for future reference, but that boat has sailed.

As Mike Preston points out, you may wish to contact a lawyer about modifying the DRO, especially if the records show less gain ... or maybe to reduce the amount to $35k as originally agreed to, since the divorce decree did not say $35k plus gains/losses.  In 2009, it may have looked like there would only be losses, so that could be why gains/losses weren't included. And there may be an argument that the gains after the divorce aren't hers. But get legal advice on it.

[JohnH]

To answers those questions:

- No there's no QDRO submitted nor approved by the court back in 2009 until now. it's just recently my ex tries to file QDRO.

- There was recent court decree in October 2016, to stop alimony since she remarried and stop child support for my 21 years old son, and a decree to give gains/losses to her portion of 401k. So, calculation needs to be done and I can't just give her the original $35K.

- Per your suggestions, I am contacting my previous employer to inquire if they have the annual records since 2009.

- Now, the worst case scenario, if my previoius employer didn't have the records. I must accept their gains/losses calculation based on S&P500. My question is, are they using the right tool to calculate it? Is there any other tool to calculate beside using  DQYDJ? if there's any other tools, I am wondering if her accountant chose DQYDJ just to get higher gains.

Thank you all for helping me out.

[GMK]

You can probably look up the performance of the specific funds in which you were invested and do a calculation from that.  Depending on how often you changed investments, it could be a large amount of calculating, and we don't know if it gets a lower total gain until it's calculated. 

Just looking at the overall performance of your primary investments since 2009 might give you a good estimate.  If memory serves, stocks have gone up fairly steadily since the end of 2009, except they were generally flat in 2011.

Good luck.

[JohnH]

Thank you all for the advice. I'll do my homework now :-)

[david rigby]

I'm perplexed by the over-emphasis on the S&P500.  If you are unable to get accurate records and are forced to estimate the earnings, pick one or more indexes that reflect the actual (types of) investments in your account.

[ESOP Guy]

You might be able to debate the S&P 500.  Do you have current statements?  Are you invested in funds that are a mix of bonds and stocks?  Do you typically invest in balanced funds or age dated funds?  If so, counter the correct method is a blended rate of stock and bond returns.  If you can show you don't switch fund ask the earnings be computed on the current fund mixes returns since 2009.  Unless the court ruled the gains/loss has to use the S&P 500 it sounds like you ex-spouse is merely staking out a position for negotiations.  Yes, since 2009 stocks have pretty much out performed every other kind of investment found in a 401(k) plan.  So counter with your own rate of return.that is reasonable. 

The above is assuming actual records can't be found.  The actual earnings is still the best.  But after that this just sounds like a business deal treat it that way and negotiate.  After actual earnings can't be determined there is no law or rule that says S&P 500 has to be the method so it is ok to push back if you desire. 

[Bird]

Quote

If you can show you don't switch fund ask the earnings be computed on the current fund mixes returns since 2009.

Yes, that!  The S&P has outperformed most funds over the last several years.  I'm not saying it's better but I would definitely not accept that as an earnings basis.

[BG5150]

19 hours ago, JohnH said:

- Now, the worst case scenario, if my previoius employer didn't have the records. I must accept their gains/losses calculation based on S&P500

No you don't.  You or your representatives can offer an alternative calculation.

[Calavera]

1 hour ago, BG5150 said:

No you don't.  You or your representatives can offer an alternative calculation.

Alternative solution could be the DOL lost earnings calculator located here:

https://www.askebsa.dol.gov/VFCPCalculator/WebCalculator.aspx

With the principal of $35,000, loss date of 11/1/2009, and recovery and payment date of 6/1/2014 it shows only $5,830 of missing interest.

[JohnH]

Thanks all for the inputs. I am contacting my former employer and see if she has the annual earning records since 2009 - 2014. 

the plan was invested in funds only, no stocks/bonds. I believe I made some changes to the funds since 2009. 

Calavera, thanks for bring it up the VFCP Calculator. Is this calculator being used often for calculating QDRO earning? 

[ESOP Guy]

he plan was invested in funds only, no stocks/bonds. I believe I made some changes to the funds since 2009. 

Our point is the funds are made of stock and /or bond investments.  So see what kind of funds they are stock funds of bond funds. 

You might want to hire your own CPA if you can't get the actual records. 

[JohnH]

ESOP Guy, I dig my paperwork and found some information that I didn't make any funds change since 2009 - 2014. Those funds are:

John Hancock Capital Appreciation Fund
Value Fund
EuroPacific Growth Fund
Small Cap Growth Fund

I am searching John Hancock website if they have any performance records for those funds.

[BG5150]

What about using the 5500s?  Come up with some sort of rate of return using the financials of the 5500's.  The 5500s should be readily available online.

 

[Bird]

All of this boils down to:  you just have to try harder.  The DOL calculator has nothing to do with your own gains or losses, nor do the plan returns (from the 5500).  Start with some common sense - do you have a clue as to how much you contributed (and your employer, if applicable) in those years?  Subtract that from your earliest known ending balance (2014?) after the 2009 balance, which is presumably known, and you should have a ballpark idea of the gross gains or losses over that time period; some of which would be attributable to new contributions, but I suspect that even if you used those numbers (too high), it would be less than the S&P returns (10 year ave. for Europac is under 3% and S&P is almost 7%...unfortunately the other names are pretty generic and could represent any of many different funds).

If your employer has the records then you are home free.  If not, call the financial advisor for the plan and see if s/he can help zero in on returns for those funds.  Also there should be a third party administrator (most of us responding here are TPAs) involved so if your employer whiffs ask her to ask the TPA.

[ESOP Guy]

The other thing you might want to search on the John Hancock site is if there are pdf of old statements.  It has been over 5 years since I worked on a 401(k) plan on John Hancock so I just don't remember how far back you can get data off their website.  But I know some of the ones my money is in I can go back a good number of years. 

I think you are on the right track however. 

[RatherBeGolfing]

On 1/11/2017 at 3:30 PM, JohnH said:

 

Unfortunately, I lost most of my statements when I moved. So, I called JHancocks, requesting a copy of the statements, and the said they do not have copies older than 2 years. So, I am missing most of the statements from Nov 2009 to Jun 2014.

 

 

1 hour ago, ESOP Guy said:

The other thing you might want to search on the John Hancock site is if there are pdf of old statements.  It has been over 5 years since I worked on a 401(k) plan on John Hancock so I just don't remember how far back you can get data off their website.  But I know some of the ones my money is in I can go back a good number of years. 

I think you are on the right track however. 

John Hancock keeps 2 years of statements on the website.  it is possible to get older statements from them but it is like pulling teeth because the rep has to put in a lot of work to get it.  Keep pushing when they say they can't get and eventually they will get it for you. 

[JohnH]

On one of the statements (3/31/2013) that I still have, I found this information. Can I use this to calculate my ex's portion using the 5 years return shown? The calculation should be from Nov 2009 to Jun 2014, but the statement is dated 3/31/2013.

Also, I attached my excel calculation, do I correctly calculate it?

Thanks all for all feedbacks.

[GMK]

This is a more realistic estimate than your spouse proposed, even though it may still overstate the account as of June 2014.

The starting (November 2009) balances were probably in different proportions to each other than in the 2013 statement.  For example, the EuroPacific fund grew much less than the others, so it probably started with a bigger percentage of the total $35k than 26.52%.  That would reduce the November 2009 amounts in the other funds, which in turn would bring the June 2014 balance estimate down ... maybe not a lot, but some.

In any case, if the employer cannot provide copies of the account statements (and the Plan Sponsor is supposed to hang on to them or be able to get them), then this would be a good counter offer.

Good luck.

[JohnH]

Thanks GMK. I finally got a hold of the HR director and she told me that they do not keep any records of any employee's account statements . I'll present this to my ex's accountant as a counter offer. Thank you.

[ESOP Guy]

Good luck with the negotiations. 

[Bill Presson]

On 1/13/2017 at 6:26 PM, JohnH said:

Thanks GMK. I finally got a hold of the HR director and she told me that they do not keep any records of any employee's account statements . I'll present this to my ex's accountant as a counter offer. Thank you.

 

I find this a little disingenuous as an answer. The may not actually have account statements, but employer's are required to keep annual reports at least 7 years (and likely longer). Those annual reports will have all your transaction information summarized.

[JohnH]

Thanks for the reply. Unfortunately, she stated that she didn't have any records whatsoever and referred me to John Hancock. And last time I called John Hancock, they did not have any statement records older than 2 years. I will try again contacting them.

 

On other subject, I don't trust my ex's QDRO preparer and worried if she planned something sneaky to get all my money. Does anyone here know someone who could review the QDRO she prepared? I apprciate it. Thanks.

[BG5150]

It is the plan administrator's duty to review the (Q)DRO and make sure it complies with all the stipulations that makes the DRO qualified.  Only the plan administrator can qualify the order.

The PA should make no opinions whether the benefit given to the alternate payee is fair other than to confirm the benefit is allowed under the plan.

It is up to you and your lawyer to review the terms of the DRO and negotiate for what you deem fair.

[GMK]

Find a lawyer who has experience with QDRO's. Since you are inexperienced in QDRO's, that's probably your only defense against something sneaky.

Keep in mind that if you and your ex agree to the wording of the DRO, the judge will most likely sign it, regardless of what was agreed to in the divorce decree.  You, however, can get your lawyer to object to terms that go beyond what was agreed to in the divorce decree.

QDRO's can become messy business, and you have every right to defend against your ex's lawyer's efforts to overstate what your ex should get.

[BG5150]

Press your plan administrator.  They should have plan-level reports somewhere.  That report should include a participant listing of accounts.  They can pull your records from that.

Maybe press John Hancock more, too.  Just because they don't have immediate access to statements older than 2 years doesn't mean they can't get that information for you.  I mean, the data just doesn't get wiped away.  Ask to talk to a supervisor, and then a manager and then the manager's superior if you do not get satisfaction.

To the group:  who is responsible for calculating earnings in these cases?  The plan administrator?  The participant?  I would think that it is the Plan Administrator, as they are approving the amount to be moved with the record keeper.

[RatherBeGolfing]

3 minutes ago, BG5150 said:

Press your plan administrator.  They should have plan-level reports somewhere.  That report should include a participant listing of accounts.  They can pull your records from that.

Maybe press John Hancock more, too.  Just because they don't have immediate access to statements older than 2 years doesn't mean they can't get that information for you.  I mean, the data just doesn't get wiped away.  Ask to talk to a supervisor, and then a manager and then the manager's superior if you do not get satisfaction.

To the group:  who is responsible for calculating earnings in these cases?  The plan administrator?  The participant?  I would think that it is the Plan Administrator, as they are approving the amount to be moved with the record keeper.

No question about it, it is the PA's responsibility.  And they have to have the records, they are required to by law.  If they don't, their service providers do.  If the service providers don't... 

Can the PA even execute what is in the QDRO if it has no records? I just don't see how.

[BG5150]

Ask your plan administrator if they use a Third Party Administrator (TPA) to help with the plan.  Maybe the TPA has the records you need.

[K2retire]

2 hours ago, RatherBeGolfing said:

No question about it, it is the PA's responsibility.  And they have to have the records, they are required to by law.  If they don't, their service providers do.  If the service providers don't... 

Can the PA even execute what is in the QDRO if it has no records? I just don't see how.

They are required by law to have the records, but in my experience they rarely do and even more rarely to they understand that they are supposed to. If you can get them to understand that requirement, they can press the record keeper or TPA to get them the information.

[RatherBeGolfing]

19 minutes ago, K2retire said:

They are required by law to have the records, but in my experience they rarely do and even more rarely to they understand that they are supposed to. If you can get them to understand that requirement, they can press the record keeper or TPA to get them the information.

I agree.  My point was more along the lines that the employer can't throw their hands up and say "sorry we don't have it".  If they don't have the records, they have to get the records from a service provider, they don't have another option.

[JohnH]

Group, thanks so much for the inputs. I am pressing my PA to get the records. I'll keep you updated.