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Plan Administrator refuses to release payments in any form other than monthly payments


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I am in desperate need of assistance. Quick overview of the case. I was divorce nearly 7 years ago. My ex-husband was awarded the family home and all equity in it in exchange that I receive 40% of his retirement plan. 

I understood at the time of the divorce that my ex-husband was not yet eligible to receive his retirement benefits and that I would have to wait 6 years before I could start receiving any benefit from his account. He turned 50 in early 2020 and I have been petitioning the Plan Administrator since that time, to no avail. 

I am now homeless and in desperate need of the monies that were awarded to me in court but the Plan Administrators refuse to release any funds to me unless I agree to receive $171/mth. I cannot live on that and would never have agreed to the settlement had I known I would become homeless and without fair and equitable resolution from the divorce. 

I have tried everything I can think of to obtain what was awarded to me and hoping and praying that you can help me. Please. Is there anything you can think of to help me? 

Through my research I have found the following to be true: 

  • This is a Multi-Employer Defined Benefit Union Pension Plan. 

  • The QDRO was signed by the Judge and Approved by the Plan. 

  • Alternate Payee is a Separate Account. 

  • Plan Participant is fully vested and is eligible for “early retirement” under the Plan after reaching the age of 50 and being employed with the company for > 30 years, however, he is still working for the employer and hasn’t taken the Early Retirement Option. 

  • Plan allows Alternate Payee to begin taking distribution under the “early retirement” clause. 

  • Alternate Payee is former spouse of Participant and agreed to receive 40% of ex-husbands pension in exchange for the family home and all equity at the time of divorce as per the division of Marital Assets. 

  • 40% Pension portion awarded to the Alternate Payee in the Divorce Decree and ordered by the Judge nearly 7 years ago. 

  • Alternate Payee’s Benefits are Not yet in Pay Status. I understand once I elect a form of benefit, I cannot change it, that is why I haven’t chosen to start payments. 

  • I requested a Hardship Withdrawal, Withdrawal under the CARES Act, a Lump Sum Payout as well as a Direct Rollover and have been formally denied for all of them by the Plan Administration. I am still within my 60 days right to Appeal. 

  • Colorado is also an equitable division state. My ex-husband was awarded the family home and all equity in it, at the time the equity was >$80,000. He received it the day of the divorce, 7 years ago. I still have received nothing and am currently homeless and nearly penniless. its certainly not fair and equitable distribution. 

 

As per the Plan: 

7.13  Direct Rollovers 

(a) General.  

Not withstanding any provision herein to the contrary that would otherwise limit a Distributee's benefit election under this section, a Distributee may elect, at any time and in the manner prescribed by the Trustees, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover; provided, however, that if a Distributee elects a Direct Rollover as to any portion of his pension benefit, the amount to be paid in a Direct Rollover must equal at least $200. If a Distributee fails to elect a Direct Rollover of an Eligible Rollover Distribution, 20% shall be withheld from the Eligible Rollover Distribution for the purpose of federal income tax withholding. 

(b) Definition for this Provision. 

 (i) An "Eligible Rollover Distribution" is any distribution of a Distributee's benefit or any distribution that satisfies the requirements of Code section 402(c)(11), except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments made for the life of the Distributee or the joint lives of the Distributee and his Spouse, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under section 7.5; the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities), or any distribution reasonably expected to total less than $200 in the calendar year. 

 (ii) An "Eligible Retirement Plan shall also include a Roth IRA described in Code section 408A, subject to the applicable provisions of Code section 408A(c)(3)(B), and the distribution rules of Code section 408A(d)(3).  

(iii) A "Distributee" includes a Participant or former Participant. In addition, the Participant's or former Participant's surviving Spouse and the 35384302v3 09/03/2019 VII-28 Participant's or former Participant's Spouse who is an alternate payee under a QDRO, are Distributees with regard to the interest of the Spouse or former Spouse. 

 (iv) A "Direct Rollover" is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. (c) Direct Rollover Notice. The Plan shall notify Distributees and all recipients of a distribution intended to satisfy Code section 402(c)(11) regarding their right to a Direct Rollover in the manner and within the time period required by applicable law. 

  • There is one form of benefit an Alternate Payee cannot be awarded in a QDRO, and that is “a Joint and Survivor Annuity with respect to the Alternate Payee and his or her subsequent spouse,” 29 U.S.C. Section 1056(d)(3)(E)(i)(III). Any other form of annuity offered by the plan to Participants may be chosen by an Alternate Payee. 

The refusal to pay a Lump Sum to the Alternate Payee who has a separate interest in the plan without restrictions on the Lump Sum payment in the QDRO would be discrimination under ERISA 510?? 

  • Section 206(d)(3)(A) of ERISA requires that every pension plan provide for the payment of benefits in accordance with the applicable requirements of any QDRO. 

  • It should be remembered that retirement benefits are subject to distribution upon divorce 
    regardless of whether they are in pay status, or matured but not in pay status (where the employee has an unconditional right to retire and obtain immediate payment of benefits, but has not yet done so), or have not yet matured, and whether or not they are “vested.” Each of 
    these possible stages of accrual of benefits has a value that can be distributed by way of an"in-kind division" or by an award to the non-employee spouse of offsetting or equalizing payments, but (of course) the stage of the accrual of benefits will affect the value of the award to the non-employee spouse. 
     
    Under ERISA, however, when benefits in a defined benefit retirement plan are matured and the employee has an unconditional right to retire and obtain immediate payment of benefits, but the employee chooses to continue working, there is authority that the non-employee spouse is entitled to demand payment of his or her share without waiting for the employee spouse to retire. This is a “divided interest” order, and the sum of the benefits payable is calculated actuarially in accordance with the age, etc., of the non-employee spouse. 
     
    One issue that appears repeatedly in the case law regarding ERISA plans is what to do about early retirement subsidies. Under private plans, the non-employee spouse’s early retirement rights are specifically recognized, so the plan must compute and pay the accrued benefit awarded to the non-employee spouse without regard to any early retirement subsidy for which the participant has not yet become eligible by retiring. 

Copied from The Plan as it relates to QDROs:12.17 Qualified Domestic Relations Orders. 

 Upon receipt of a domestic relations order issued by a court of competent jurisdiction with respect to a Participant's interest in the Plan, the Trustees shall determine whether such domestic relations order constitutes a QDRO. The Trustees shall establish reasonable procedures to determine the qualified status of a domestic relations order and to administer distributions mandated thereunder. Unless a QDRO specifically provides acceptable alternative instructions, each alternate payee's monthly benefit under a QDRO shall be determined by multiplying the Actuarial Equivalent by the Award and dividing that product by the Conversion Factor. For purposes of this formula, the terms used in the preceding sentence shall have the following meaning: (a) Actuarial Equivalent shall be the present value of the aggregate amount projected to be paid to the Participant during his lifetime in the Monthly Income for Life form of pension benefit and subject to division under a QDRO. If the Participant is not receiving benefits when the alternate payee requests payment, the Actuarial Equivalent shall be determined as follows rather than any early retirement factors or other subsidies provided by the Plan: (i) the interest rate set forth in section 5.7(b) as of the date on which the alternate payee begins to receive benefits from the Plan; and (ii) the mortality table described below: [a] for Class RC Participants, the 1983 Group Annuity Mortality Table; [b] for Class M Participants: 

if the Class M Participant's domestic relations order was issued by a court of competent jurisdiction prior to July 1, 2016, the 1971 Group Annuity Mortality Table with ages set forward one year; and [ii] if the Class M Participant's domestic relations order was issued by a court of competent jurisdiction after June 30, 2016, the 1983 Group Annuity Mortality Table. If the Participant is receiving benefits from the Plan when the alternate payee requests payment, the Actuarial Equivalent shall be determined using the early retirement factors and any other applicable subsidy provided by the Plan for the form of benefit being paid to the Participant, based upon the alternate payee's age on the date on which benefits commence to him or her. (b) Award shall be equal to that percentage of the Participant's benefits that are awarded to the alternate payee pursuant to a QDRO. (c) The Conversion Factor shall reflect the actuarial adjustment necessary to convert the alternate payee's benefit to a monthly benefit for life and shall be based upon the alternate payee's age on the date on which benefits commence to him or her. This actuarial adjustment shall be made using the interest and mortality assumptions used to determine the Actuarial Equivalent in section 12.17(a) above. (d) In the event that the parties to a QDRO enter into an agreement subsequent to the entry of the QDRO to renegotiate each parties' share of the benefits that are subject to the QDRO (a "renegotiation agreement"), and a court of competent jurisdiction finds that: (i) after entering into the renegotiation agreement, but prior to amendment of the QDRO to reflect the renegotiated benefits; a party (the "breaching party") has elected benefits under the original QDRO, (ii) pursuant to the renegotiation agreement, the breaching party is not entitled to some or all of the benefits already received and/or to be received by that party under the terms of the original QDRO and the breaching party's actions in receiving such benefits has damaged the other party, and such court enters an amended QDRO to rectify such damage, then the Trustees shall, to the extent feasible, adjust the amount and form of distribution for either or both parties to the amended QDRO, which may include reannuitization of the benefits. 

Please is there anyway possible for me to obtain the funds other than monthly payments??

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Unless the plan includes lump sum as a distribution option, the Plan Administrator is not permitted to pay your benefits in that form. The direct rollover provisions you cite are generic statutory provisions and do not mean that the plan has a lump sum option. The plan section describing optional forms of payment will disclose whether or not lump sum is an option. Sorry for your predicament, but unfortunately the rules (if being followed) cannot be bent to accommodate you.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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You can only roll over a payment that is an eligble rollover distribution.  Generally, annuity payments are not eligible rollover distributions.  As Cusefan advises, you need to look at exactly what the distribution options are, and it does not look good from the texts you sent.  It is part of unfortunate plan document practices that plans include language that simply reflect certain legal requirements, whther or not the language/requirements are actually relelvant to that particular plan and the way it is designed.

The language in your QDRO also matters relating to when you can start benefits even if the participant choses not to start.  Look in the order to see if it mentions ability to start your benefits at the participant's "earliest retirement age".  Frankly, if it is not there, and there is not a specific reason for it not to be there, I think it is malpractice on the part of the lawyer who drafted the provisions of the QDRO.

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Thank you for responding QDROphile, the QDRO does permit me to start withdrawals now as per the "earliest retirement age". So I am able to start receiving payments now. Payments are only $171/mth. I can't live on that. As far as Distribution Options go, the QDRO states that I can chose from any Option provided to the Participant. however, they stated that "the only payment option available is a monthly benefit for your lifetime", now that it's time to start payments. I have reviewed the 182 page Plan Document (that they provided only after I requested it and after the QDRO) was final) and I'm not finding that there are any other options available other than monthly payments. So in a fair and equitable state, he gets the Family Home and >$100k in equity and I get $171 a month to live on.while homeless? How is that fair or right? I am aware that no one is interested in the personal reasons for the divorce of over 18 years and I am also aware that the Plan rules "can not be bent to accomodate me" as CuseFan put it, but I am desperate to say the least. The money from this retirement was all I had to start living again. The judge awarded me 40%, that's what I agreed to. I never agreed to only monthly payment of $171! 

Can I sell my single life annuity? What can I do? 

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You may have made a bad deal.  Why only 40%?  Why give up home and equity? (that is, maybe you should have a share of each.) 

Maybe poor performance by your attorney.  Maybe your ex-husband hid information?  You probably need legal advice; perhaps a different attorney.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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It is likely that references to "annuity" describe only the form of payment from the plan, not a separate financial instrument.  Some plans will distribute an annuity contract (a financial instrument), but I believe that your plan will not, so there is nothing for you to sell.  Your interest is a stream of payments from the plan that the plan will not allow you to assign and no one will be willing to buy under the table.

As for what to do about your situation, I will not venture into your divorce settlement, which would involve state domestic relations law.  It has been my expeerience on the sidelines of state domestic relations law that the courts are very reluctant to revisit or review judgments except in the case of deception (e.g. "your ex-husband hid information).  

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I think I know what may have happened. I suspect the pension had an option for you to receive a shared interest in his retirement annuity.  That means that you must wait until he retires before you get your share.  The decision as to when he retires is up to him.  The court cannot force him to retire.  The other option is for you to get a separate interest in his retirement, that his a part of his retirement benefits are transferred to you and you can start receiving payments even before he retires, but he must be over age 50 and eligible for retirement, normally at age 55.  But the amount you receive will be based on your life expectancy and if you are young the amount will be less since it must be paid out over a greater number of years. 

I cannot tell which option was set forth in the QDRO but if they are offering you an annuity while he is still working then it sounds like a separate interest.  If you are age 50 or less, then the amount you will receive will be greatly reduced because the mortality tables give you a life expectancy of 34 years or more.  Maybe you or you attorney misunderstood the value of his pension.  I am not even sure you are right in saying that you were to receive 40%.  I suspect it was 40% of the marital share and the marital share is a fraction whereby the numerator is the number of months of credited service during the marriage and the denominator will be the number of months of credited service at his retirement.  

 

You need to find a lawyer who can help you.  But that will be expensive I fear.  

 

David Goldberg 

I have never seen a union pension with a lump sum option.  You must take your share as an annuity, shared or separate.  Without seeing the QDRO and knowing what state you live it there is not much more help I can give you. I would assume the Plan Administrator knows what he is doing.  I assume at some point he wrote you a letter explaining your options and why he was denying your claim.  The Plan Administrator owes a fiduciary duty to you as a potential beneficiary of the pension    

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You need to take three actions. First as you apparently live in Colorado call the U.S Department of Labor Office (DOL) in Denver to see if they could help you.  The DOL may not be able to do anything but it is worth a telephone call.  Second as it sounds like you would b eligible for legal assistance  call or go to a Legal Assistance  organization in Denver or Colorado Springs or whatever other city you live in (as best you can) in Colorado and request assistance as it sounds as though you clearly qualify for legal assistance.  If the legal assistance organization does not have an attorney who is a pension expert come back to this Board with the name and telephone number of the  legal assistance organization and request that I or someone else take on your matter on a pro bono basis. All of us have to report our pro bono hours each year when we renew our registration to continue to practice law in the state in which we practice but we have to be appointed by  a legal assistance organization to report those hours.  If we simply agree to help you we cannot report whatever hours we work to resolve your matter. Also, and more importantly if  whoever of us takes on your matter comes through a legal assistance the employee benefits representative at the union might be more willing to come up with a satisfactory resolution.   A telephone call  from a pension lawyer and a discussion of the facts may be sufficient to resolve the matter.  Third  file a complaint with the Consumer Protection Division of the Attorney General's Office of the State of Colorado. Fourth call the offices of Colorado  Senators John Hickenlooper and Michael Bennett regarding your situation

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Mr. Bernard G. Peter,

I sincerely appreciate your expertise and response and I will do as you suggested. 

I copied this directly from the QDRO    "The Plan shall pay directly to the Alternate Payee, 40% of the Petitioner’s accrued vested benefits as of June 16, 2016 (the “Assignment Date”)"

Does this give me legal grounds to stand on when requesting that the Plan distribution the benefit be immediate?

Thank you again, you don't know how much I appreciate your assistance

On 11/10/2021 at 7:37 AM, Bernard G. Peter said:

You need to take three actions. First as you apparently live in Colorado call the U.S Department of Labor Office (DOL) in Denver to see if they could help you.  The DOL may not be able to do anything but it is worth a telephone call.  Second as it sounds like you would b eligible for legal assistance  call or go to a Legal Assistance  organization in Denver or Colorado Springs or whatever other city you live in (as best you can) in Colorado and request assistance as it sounds as though you clearly qualify for legal assistance.  If the legal assistance organization does not have an attorney who is a pension expert come back to this Board with the name and telephone number of the  legal assistance organization and request that I or someone else take on your matter on a pro bono basis. All of us have to report our pro bono hours each year when we renew our registration to continue to practice law in the state in which we practice but we have to be appointed by  a legal assistance organization to report those hours.  If we simply agree to help you we cannot report whatever hours we work to resolve your matter. Also, and more importantly if  whoever of us takes on your matter comes through a legal assistance the employee benefits representative at the union might be more willing to come up with a satisfactory resolution.   A telephone call  from a pension lawyer and a discussion of the facts may be sufficient to resolve the matter.  Third  file a complaint with the Consumer Protection Division of the Attorney General's Office of the State of Colorado. Fourth call the offices of Colorado  Senators John Hickenlooper and Michael Bennett regarding your situation

 

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No.  That just means that whatever benefit he had earned as of June 16, 2016, you are entitled to 40% of it.  That statement does not impact when, or how, you will be paid those benefits.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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Recourse from what?  The QDRO cannot supersede the plan's provisions.  If the plan document does not permit a lump sum, then they are not legally permitted to pay one. 

If the participant is eligible for early retirement under the plan, you might be able to start receiving the monthly benefit prior to the participant's normal retirement date, however, the reduction for early commencement would be significant.  Likely more than a 50% reduction at 55.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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