Delayed Receipt of QDRO qualification

[New to Erisa]

Hi All,

Are there any impacts under ERISA if the QDRO qualification notice was sent to the AP (using an address on file and not the address on the QDRO) and the AP says it took weeks to receive it was forwarded to the new address? 

 

Thank you!

[QDROphile]

First tell us what practical effect the delay had for  the AP, other than the formal ability to request benefits two week earlier.  Practical effects of a delay in application for benefits might count.

Absent unusual circumstances, a two week delay in proper delivery has no legal effect.  No alternate payee can ever get payment fast enough. 

[New to Erisa]

Thank you!  The AP is asserting that the delay resulted in the value of the account going down due to market fluctuation.

[My 2 cents]

42 minutes ago, New to Erisa said:

Thank you!  The AP is asserting that the delay resulted in the value of the account going down due to market fluctuation.

...and had the AP been given prompt notice and immediately asked for a payout, it still would surely have taken a period of time to execute those instructions (particularly for a freshly approved QDRO) and the market would have gone down anyway before the assets could have been liquidated.  I am not a lawyer, but no relief would have been likely, since the assets could have gone up as easily as down.  Hindsight should not be admissible at  trial if it comes to that.

[david rigby]

Maybe.  The mailing was sent incorrectly, but the correct address had been provided.  Note the original post states "...it took weeks...", different from the "...two weeks..." in another post.  

From the facts given, we don't know how much delay applies in this case.  If the AP feels he/she has a legitimate complaint, then he/she should use the plan's claim/appeal procedures.  The PA should consider whether the "...AP is asserting..." may have already begun such appeal procedures.

[Luke Bailey]

I don't think the AP is making a benefit claim, but rather a claim of fiduciary breach, i.e. that the plan administrator, by mailing to wrong address, breached its duty of care. The plan's claims procedures should not apply, unless the AP voluntarily chooses to submit to them. But certainly the plan should not get the usual benefits of doing full admin procedure, i.e. any later judicial review of an adverse decision by the plan should not be limited to the admin record and the "arbitrary or capricious" standard of review should not apply.

In a somewhat similar situation that I was involved in regarding a vendor change that was delayed by one day as the result of a trustee error and resulted in a large loss, the argument that the market could have just as easily gone up over the 24-hr period was of no avail. The trust law rule is clear that once a breach of the duty of care has been shown, the responsible fiduciary is liable for all damages that are a direct result of the breach.

In that case, the order to liquidate the assets had clearly been given. Here, presumably there's no proof that the AP would have promptly sold the assets subject to the QDRO, so maybe the fiduciary would be able to defend on that basis. I would probably ask the AP for any sort of evidence that indicates he/she would have sold immediately upon being informed of QDRO. Certainly the AP should have know of the approval of the QDRO by the court through the AP's own counsel. If the AP did not inquire about the delay to the plan, would seem to show that the AP did not have an intent to sell until after the market declined.

[ESOP Guy]

No one seems to be questioning using the address on file vs on the QDRO is an error.  I am not an expert on this but using the address on file seems reasonable.  I have seen addresses on a QDRO be wrong if it takes time from drafting to filing with court and the person moves. 

So has there really been an error?  I am happy to be told either "yes" or "no" but to me everyone skipped that step on the analysis.  Maybe becasue per the law it is obvious it is an error but I thought I would at least ask the question. 

[QDROphile]

 The statutes say that, in order to be qualified, a domestic relations order must state the mailing address of the alternate payee, NOT the last known mailing address of the alternate payee (as commonly misapprehended, including by that QDRO-incompetent organization, the Department of Labor).  If the statutes say that the mailing address must be stated in the order, I think a good argument can be made the overlooking the terms of the order and using some other address available to the plan (a "last-known address"?) is unreasonable.  The plan administrator is also charged with administering a QDRO in accordance with its terms.

I am not arguing that the delay discussed in this thread is cause for liability.

[Mike Preston]

So you are arguing for a required DRO modification if the AP moves?

[Belgarath]

I wonder why the difference (last known mailing address for the participant, but omitting the words "last known" for the alternate payee)? Maybe because the alternate payee is actually the one receiving the funds, so a current address is more important? Or maybe just a drafting error? Not that the reason really matters at this point...

[My 2 cents]

2 hours ago, Belgarath said:

I wonder why the difference (last known mailing address for the participant, but omitting the words "last known" for the alternate payee)? Maybe because the alternate payee is actually the one receiving the funds, so a current address is more important? Or maybe just a drafting error? Not that the reason really matters at this point...

Not a lawyer, but I would put my money on the requirement being what it is (i.e., current address for the AP) is because in so many of these cases, the "last known address" for the AP  would be the same as the participant's (they were married, after all), but the circumstances having changed (due to divorce), it ought to be presumed that the AP is not living there any more.  Just saying.

[RatherBeGolfing]

21 minutes ago, My 2 cents said:

Not a lawyer, but I would put my money on the requirement being what it is (i.e., current address for the AP) is because in so many of these cases, the "last known address" for the AP  would be the same as the participant's (they were married, after all), but the circumstances having changed (due to divorce), it ought to be presumed that the AP is not living there any more.  Just saying.

But if you have one address on file for the AP (possibly same as participant) and you get a new address in the QDRO, wouldn't the QDRO address be the "last known address" since it is newer than the address previously on file?

[My 2 cents]

29 minutes ago, RatherBeGolfing said:

But if you have one address on file for the AP (possibly same as participant) and you get a new address in the QDRO, wouldn't the QDRO address be the "last known address" since it is newer than the address previously on file?

Sure, in a perfect world, but that does not appear to be the situation as described in the original post!

[ESOP Guy]

1 hour ago, RatherBeGolfing said:

But if you have one address on file for the AP (possibly same as participant) and you get a new address in the QDRO, wouldn't the QDRO address be the "last known address" since it is newer than the address previously on file?

I have seen QDROs that have taken months from start to finish to get approved by a everyone and the court. The lawyers are as a profession they aren't focused on the address but the terms of the QDRO.  So the AP has moved out of the family house as noted above.  They might have started by moving to a relative's or the first apt they can find.  In the time since then they have moved to where they are going to be going forward.  So I have seen the QDRO have the wrong address for the AP. 

Some times the law doesn't care and maybe this is one of those times.  And yes I would think when you got the QDRO vs the last address update would be an important factor. 

[RatherBeGolfing]

10 minutes ago, ESOP Guy said:

I have seen QDROs that have taken months from start to finish to get approved by a everyone and the court. The lawyers are as a profession they aren't focused on the address but the terms of the QDRO.  So the AP has moved out of the family house as noted above.  They might have started by moving to a relative's or the first apt they can find.  In the time since then they have moved to where they are going to be going forward.  So I have seen the QDRO have the wrong address for the AP. 

Some times the law doesn't care and maybe this is one of those times.  And yes I would think when you got the QDRO vs the last address update would be an important factor. 

I don't disagree with anything in your post.  My comment was simply addressing the point that if the "last known" on file is the same as the participant, a different address in the QDRO is most likely a more recent address.  I have also seen the address on the QDRO be wrong for various reasons.  

As QDROphile pointed out, the statute requires certain things to be in the QDRO, one of them being the APs address .  The statute also requires that the PA notifies the AP of the receipt of the DRO, its procedure for determining qualified states, and to notify the AP when the determination is done.  The statute does NOT require that the notification be made to to the address in the QDRO, but this is where the requirement for a plan to establish reasonable procedures to determine qualified status and administer distributions come into play.  

Does the plan have a procedure for where to send the notice?  Does it have a procedure for a case where the address on file is different from the one in the QDRO? 

Does it sound reasonable for the PA to simply send it to an address different than the one in the QDRO with no verification that it is the correct address?  I think you need a pretty good reason to use an address other than the address in the QDRO, maybe something like written verification?

Based on the few facts we have, it seems pretty clear that the PA made a mistake.  What is not clear is whether that mistake caused a loss to the AP or whether there is liability attached.

 

[Luke Bailey]

Presumably the "last known" was left out of the statute for the AP on the assumption that employer would have address for employee/plan participant, not for alternate payee. Ultimately, whether mailing to last known AP address vs. AP address in QDRO was a breach of duty of care would be for judge to decide. It looks pretty incompetent to me on the PA's part to have ignored the address on the QDRO. But the AP would have to show that the breach led to damages (i.e., I think, show that he or she intended to liquidate immediately, vs. just speculating that would have done so based on hindsight), and if the amount is small, he or she might have a tough time litigating this.