Divorce Agreement States all DRO rights are waived

[cheersmate]

Profit Sharing Plan has 2 participants who are husband and wife, soon to be ex-husband and ex-wife.  Both have agreed not to request a DRO with respect to the other's PS account balance.  This is stated in the Divorce Agreement (not yet signed by both parties).

The husband has terminated service with the plan sponsor and has requested distribution of his AcctBal. 

In order for the plan sponsor to proceed with the husband's distribution, the plan needs assurance a DRO will never be presented to the Plan.

1. Would statements from each of the 2 participants, each irrevocably waiving the right to bring forward a DRO with respect to their soon to be former ex-spouse be sufficient, and if so, should it be a notarized statement or is a witness sufficient?
2. Also, if the Divorce Agreement were signed would it be sufficient on its own (thus no individual waiver statements needed)?

Thank you.

[Peter Gulia]

Before the plan's administrator acts under an assumption that it should require an assurance that a domestic-relations order will not be presented, the administrator might want its lawyer's advice about whether the plan's provisions support imposing such a condition on a participant's claim for a distribution.

[cheersmate]

Thank you Peter Gulia PC.

The plan's QDRO procedure specifically states:

Procedure prior to receipt of order: The Plan will apply the following procedure prior to the Plan's receipt of a domestic relations order.
1. Suspension of Participant distributions or loans. If the Administrator is on notice (verbal or written) regarding a pending domestic relations action (e.g., a divorce) and has a reasonable belief the Participant's account may become subject to a QDRO, the Administrator may suspend processing the Participant's distribution or loan requests pending resolution.
2. Removing hold on the account. After placing a hold on the account, the Administrator should notify the Participant of the hold on the account. In order to remove the hold, the Administrator should request the Participant to provide written confirmation that a court will not issue a QDRO with respect to the account; such as a property settlement agreement awarding the entire account to the Participant.

[ESOP Guy]

Doesn't this part of the procedure answer your question? 

In order to remove the hold, the Administrator should request the Participant to provide written confirmation that a court will not issue a QDRO with respect to the account; such as a property settlement agreement awarding the entire account to the Participant.

It just says you need the participant to respond and it needs to be written.  Not both it doesn't need to be notarized.....

[cheersmate]

Okay ... not to belabor the point, since it would be the ex- who brings the QDRO with respect to a participant's account, it seems the Plan is best protected by having a statement from the wife saying she will not bring a QDRO wrt to the husband's account, and vice-a-versa. Are you saying this is not necessary? The property settlement agreement would not suffice in this case because remember, the Divorce Agreement is not yet signed by both parties.   Thank you again!

[Mike Preston]

You can only follow the procedure.  If you don't think it protects the plan properly, amend the procedure.  Then follow the amended procedure.

[Todd Flessner]

Wouldn't it be better/safer/more prudent for the plan to require each to submit a DRO that specifically states that the EE gets 100% and the AP gets 0%? Otherwise the plan is left open to a DRO later, even if they "promised" not to later submit one.

[david rigby]

2 minutes ago, Todd Flessner said:

Wouldn't it be better/safer/more prudent for the plan to require each to submit a DRO...

Sure, the documentation is better, but why force the parties to assume this legal expense if not necessary?  As stated above, a well-written QDRO procedure will already include a simple method for communicating this type of information.

[gregmk]

Personally I don't love the idea of anyone promising not to do anything or the idea of suspending the benefit if the administrator has notice of a potential pending DRO. I would change procedure to not suspend anything until at least a draft DRO is received. Too much gray area there.

If someone shows up with a QDRO after the benefits have been distributed, that's unfortunate, but not the plan's problem.

If the divorced parties want to agree not to get a QDRO, that's between them. If one of them violates the agreement, let them go after each other.

See this thread for more:

 

[cheersmate]

Thank you everyone.  I really appreciate the insight and suggestions.