Plan's duty when QDRO inconsistent with divorce decree?

[BombyxMori]

Is there any consensus on whether a Plan should rely on a QDRO when it has reason to know that the QDRO conflicts with the underlying divorce decree's division of property? 

If you receive a QDRO, you review it, determine if it meets the requirements of a QDRO under ERISA, and if so, you implement it.  Does that change if you get extraneous information, like if you also happen to receive the divorce decree and the QDRO does not appear to reflect it accurately? Does a duty to investigate arise? Or is the plan required to implement the terms of the QDRO and not look beyond this?

From what I have seen, different states have different rules about modification of a final divorce decree. Accordingly, different state courts have come to some different conclusions about the validity of a QDRO that conflicts with the divorce decree, based on whether state law allows it as a modification. But, this issue arises in disputes between the parties to the divorce. It seems to me that it can't be the case that a Plan has a duty to inquire or to know, under the state law of various states, whether a QDRO should have been entered or not, if, in fact, it was entered.  If you receive it and it is signed and court-certified, but you also receive the divorce decree, and they're inconsistent, does a Plan ever have a responsibility to determine whether it was a permissible modification of the divorce decree? 

The 2010 regulations at 2530.206 seem to suggest that Plans shouldn't take this into account. "... a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order."  Would you read this to mean that, when the QDRO is subsequent to the divorce decree and is inconsistent with it, that it shouldn't fail to be a QDRO on that basis? 

However, if it is void under state law because it impermissibly modifies the final divorce decree, then it is not an order "entered pursuant to state law," is it? But, are Plans ever responsible for raising that? Or is that strictly for the parties thereto to work out? 

[QDROphile]

The plan rules on whatever is submitted as a domestic relations order for qualification.  The plan should look at nothing else.  If a separate decree, dated earlier, is submitted, the plan should expressly state that the decree is has not been considered in the consideration of the DRO.  Same for an other ancillary information.  Any latent claim about state law validity or interpretation, or a subsequent order or modification, can be addressed under claims procedures.

[Larry Starr]

1 hour ago, BombyxMori said:

Is there any consensus on whether a Plan should rely on a QDRO when it has reason to know that the QDRO conflicts with the underlying divorce decree's division of property? 

If you receive a QDRO, you review it, determine if it meets the requirements of a QDRO under ERISA, and if so, you implement it.  Does that change if you get extraneous information, like if you also happen to receive the divorce decree and the QDRO does not appear to reflect it accurately? Does a duty to investigate arise? Or is the plan required to implement the terms of the QDRO and not look beyond this?

From what I have seen, different states have different rules about modification of a final divorce decree. Accordingly, different state courts have come to some different conclusions about the validity of a QDRO that conflicts with the divorce decree, based on whether state law allows it as a modification. But, this issue arises in disputes between the parties to the divorce. It seems to me that it can't be the case that a Plan has a duty to inquire or to know, under the state law of various states, whether a QDRO should have been entered or not, if, in fact, it was entered.  If you receive it and it is signed and court-certified, but you also receive the divorce decree, and they're inconsistent, does a Plan ever have a responsibility to determine whether it was a permissible modification of the divorce decree? 

The 2010 regulations at 2530.206 seem to suggest that Plans shouldn't take this into account. "... a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order."  Would you read this to mean that, when the QDRO is subsequent to the divorce decree and is inconsistent with it, that it shouldn't fail to be a QDRO on that basis? 

However, if it is void under state law because it impermissibly modifies the final divorce decree, then it is not an order "entered pursuant to state law," is it? But, are Plans ever responsible for raising that? Or is that strictly for the parties thereto to work out? 

If you get a DRO and the plan says it is a QDRO and you implement it as such, you have done exactly what you have to do.

However, if you have not implemented and you get both the QDRO and the divorce order, I call the attorney who drafted it and inform them of what I see as the problem and gently suggest they might want to re-look at it in order to avoid a case of malpractice.  Generally, I draft the QDRO's for 98% of my cases and I avoid this issue by making sure the order (which is supplied to one of the atty's to get into the court) matches the divorce decree.  It is criminal how often domestic law atty's who think they know what they are doing and draft their own orders do a royal screw up!

[QDROphile]

I have no objection to Larry Starr's practical approach of contacting the person who submitted inconsistent domestic relations orders (the divorce decree is a domestic relations order, too), but it involves more work and responsibility than is required of the plan.  The advantage is that the plan might be saving itself some grief in the long run by forcing resolution of a potential dispute before the plan acts officially.  If a dispute arises about state law issues after determining an order is qualified, the plan is likely to get involved in (but not responsible for) the resolution in some way that makes for extra work by the plan.

Certainly if the plan receives a draft DRO and the inconsistent divorce decree for review before submission of the DRO to the court (please do not ever use the term "prequalification"), the plan's response to the submitter should include a statement that the plan is only considering the DRO and will formally expressly disclaim any review or effect of the divorce decree.  Or, the plan could add informally that it noticed an apparent inconsistency that might benefit from attention before the actual DRO is submitted, as suggested by Larry Starr.

[fmsinc]

Under ERISA the Plan Administrator is to implement the QDRO presented to it so long as it's permitted by the plan documents.  They are not to question whether or not the state law was properly applied or the motive of the parties.  See, Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865 (2009);  PaineWebber v.  East, 363 Md.  408, 768 A.2d 1029 (2001); Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011); but cf: U.S. v. Brazile, No. 4:18CV56 RLW, United States District Court, E.D. Missouri (2018).

I have been preparing QCROs for many years and it often happens that the parties will, for good reasons, do something other than what is in the Judgment of Divorce or in their Separation Agreement.  They may decide, for example, to change from a shared interest to a separate interest allocation of benefits.  Of they may decide to reduce an Alternate Payee's share of benefit in exchange for a transfer of other assets.  

On the other hand it might just be a case of the person who prepared the QDRO doesn't know what he/she is doing.  If you approve (Qualify) the QDRO and send a determination letter, and they don't object, then you have done your duty.   You need not become an advocate for either party.  

On the third hand we all have moral compasses and many plan administrators such as OPM want to see a copy of the JAD and a copy of the separation agreement, if any, and cannot avoid judging the COAP (for FERS and CSRS) or QDRO with an eye on what was intended.  

 

[Larry Starr]

17 hours ago, fmsinc said:

Under ERISA the Plan Administrator is to implement the QDRO presented to it so long as it's permitted by the plan documents.  They are not to question whether or not the state law was properly applied or the motive of the parties.  See, Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865 (2009);  PaineWebber v.  East, 363 Md.  408, 768 A.2d 1029 (2001); Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011); but cf: U.S. v. Brazile, No. 4:18CV56 RLW, United States District Court, E.D. Missouri (2018).

I have been preparing QCROs for many years and it often happens that the parties will, for good reasons, do something other than what is in the Judgment of Divorce or in their Separation Agreement.  They may decide, for example, to change from a shared interest to a separate interest allocation of benefits.  Of they may decide to reduce an Alternate Payee's share of benefit in exchange for a transfer of other assets.  

On the other hand it might just be a case of the person who prepared the QDRO doesn't know what he/she is doing.  If you approve (Qualify) the QDRO and send a determination letter, and they don't object, then you have done your duty.   You need not become an advocate for either party.  

On the third hand we all have moral compasses and many plan administrators such as OPM want to see a copy of the JAD and a copy of the separation agreement, if any, and cannot avoid judging the COAP (for FERS and CSRS) or QDRO with an eye on what was intended.  

 

"They are not to question whether or not the state law was properly applied or the motive of the parties." I disagree with the direction that they are NOT to question; they clearly don't have to, but when you know something is wrong (at least in your mind), it never hurts to check with the parties.  The avoiding of problems is appreciated much more often than just processing the order when you know it is not in line with the divorce agreement.

"I have been preparing QCROs for many years and it often happens that the parties will, for good reasons, do something other than what is in the Judgment of Divorce or in their Separation Agreement.  They may decide, for example, to change from a shared interest to a separate interest allocation of benefits.  Of they may decide to reduce an Alternate Payee's share of benefit in exchange for a transfer of other assets." Any lawyer who is party to an action that VIOLATES a judge's order (yes, that is what is being suggested above) is in violation of a whole host of things, including legal ethics, even if all parties agree.  Until the judge who gave the order agrees, you are not complying with the judge's order and subject to possible corrective action. If something needs to be changed, you have to go back to the judge to get the order revised, because the judge has the right NOT to agree with such a change.  Perhaps there is undue influence being brought to bear on one of the parties or many other possibilities of why a judge might not give consent.  Sorry, but this is just very bad advice.

"On the other hand it might just be a case of the person who prepared the QDRO doesn't know what he/she is doing.  If you approve (Qualify) the QDRO and send a determination letter, and they don't object, then you have done your duty.   You need not become an advocate for either party." Despite my comments above, this is true.  It's just that if you KNOW there is a problem, my rec is to contact one of the lawyers (or sometimes, the participant if I am representing the client as the business owner and recognize a possible issue and then recommend that the client speak to his/her atty).

And then, there are the (rare) times I am not drafting the order but the order comes in (not having me pre-review it) already signed by the judge and from the language I know that the way the distribution is going to be determined is not what they THINK will be done (but will still comply with the order, just not with what the parties intended).  Again, I call the lawyer and make sure they understand how the distribution is going to work so that if that is NOT what the parties want, they might want to get the order modified.

[david rigby]

Larry's advice of practicality is wise.  Here is another reason: since the sponsor and/or Plan Administrator might be incurring a cost for its DRO review, it is prudent to make sure that cost is not increased (perhaps doubled) due to having to re-process a corrected DRO.  The phone call recommended by Larry is inexpensive.