Jump to content

Spouse received all money in his Money Purchase Plan


Recommended Posts

2 letters were sent from plan administrator stating the funds could be dispersed per ERISA 18 month rule in full to the participate if the QDRO that was approved by the plan and sent back for signature from the court is not returned to the plan. Not in exact words but meaning was they needed the signature of the court and sent back to them. These letters were a year apart of them being sent. Wife takes the full amount of the account and rolls it over out of the plan since the last letter stated the same and has been waiting over 6 years and this is first time the 18 month rule was mentioned. Now the attorney who did not file the QDRO until 5 days after funds were rolled over leaving a account balance of $0 with the plan files a contempt charge on wife stating that Wife did not pay spouse what was owed per the divorce decree and QDRO. Should the wife return the funds to the plan that has been discharged per the letters?

Link to comment
Share on other sites

I'm having a great deal of trouble understanding the text of your question.

Two letters were sent by the plan administrator -- to whom?

Could you type (as a reply) the text of those letters (just put a blank line where names and addresses appear)?

I am assuming that the wife is the participant here. Correct?

The participant has been waiting 6 years, I see. Please explain when the 6-year period started. I'm not sure what the significance is.

You say the attorney who did not file the QDRO; are you saying the attorney for the participant's husband did not provide a copy of the order, signed by a judge, to the plan until 5 days after the funds were distributed to the wife (via a rollover, I believe you said)?

What do you mean by "funds to the plan that has been discharged per the letters" -- what does "discharged" mean here? And what do you mean by "per the letters"?

I know the Department of Labor has published two documents for the general public about the 18-month rule --

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/qdro-determining-qualified-status-and-paying-benefits.pdf 

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/qdros.pdf

Link to comment
Share on other sites

No, the wife should not attempt to return the monies to the Plan, it sounds like the Plan may have followed its processes with full disclosure of timing, and the Plan may be able to reject the return.  Assuming she did a 100% rollover the ex-spouse's feet-dragging attorney could likely attempt to serve a QDRO to the IRA custodian, instead of further aggravating the situation with a b**ls**t c.y.a. move like a contempt charge.

Link to comment
Share on other sites

A prudent Plan Administrator, following the advice of a cautious attorney, would have known that there was a pending QDRO and been very careful about paying out the funds to the Participant.  Rather It would have been appropriate deposit the money into the Registry of the Court in connection with an Interpleader action and allow the Court to decide what to do with it.   Now the Plan is likely to be sued by the Alternate Payee for breach of fiduciary duty.  And the Participant will be sued by the Alternate Payee for contempt and/or breach of contract.  And the Alternate Payee's attorney will be sued by the Alternate Payee for malpractice. And you will have to figure out what to do about the withholding you sent to the IRS.   

Did you review and understand the attached.  

Did you review the underlying Agreement or the Judgment of Divorce  to determine if it had all of the minimal information required by IRC 414(p)(2) to qualify as a QDRO even without a formal DRO signed by the Court?  

Were you looking for a signed copy?  Or a certified copy?  Or a true teste copy?

Did you follow Advisory Opinion No. 1999-13A , the DOL Division of Fiduciary Interpretation Office of Regulations and Interpretations  The full Opinion can be found at https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/1999-13a.  The first line of the Opinion states

        "This is in response to your request on behalf of the UAL Corporation (UAL) and United Air Lines, Inc. (United) for an advisory opinion. Specifically, you ask how a plan administrator should treat domestic relations orders the plan administrator has reason to believe are "sham" or "questionable in nature."

Later on the Opinion continues:

        "You have asked for an advisory opinion as to whether, and if so when, a plan administrator may investigate or question a domestic relations order submitted for review to determine whether it is a valid “domestic relations order” under State law for purposes of section 206(d)(3)(B) of ERISA."  

The response was as follows inter alia:

        "When a pension plan receives an order requiring that all or a part of the benefits payable with respect to a participant be paid to an alternate payee, the plan administrator must determine that the judgment, decree or order is a “domestic relations order” within the meaning of section 206(d)(3)(B)(ii) of ERISA — i.e., that it relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the participant and that it is made pursuant to State domestic relations law by a State authority with jurisdiction over such matters. Additionally, the plan administrator must determine that the order is qualified under the requirements of section 206(d)(3) of ERISA. It is the view of the Department that the plan administrator is not required by section 206(d)(3) or any other provision of Title I to review the correctness of a determination by a competent State authority pursuant to State domestic relations law that the parties are entitled to a judgment of divorce. See Advisory Opinion 92-17A (Aug. 21, 1992). Nevertheless, a plan administrator who has received a document purporting to be a domestic relations order must carry out his or her responsibilities under section 206(d)(3) in a manner consistent with the general fiduciary duties in part 4 of title I of ERISA."

        "For example, if the plan administrator has received evidence calling into question the validity of an order relating to marital property rights under State domestic relations law, the plan administrator is not free to ignore that information. Information indicating that an order was fraudulently obtained calls into question whether the order was issued pursuant to State domestic relations law, and therefore whether the order is a “domestic relations order” under section 206(d)(3)(C). When made aware of such evidence, the administrator must take reasonable steps to determine its credibility. If the administrator determines that the evidence is credible, the administrator must decide how best to resolve the question of the validity of the order without inappropriately spending plan assets or inappropriately involving the plan in the State domestic relations proceeding. The appropriate course of action will depend on the actual facts and circumstances of the particular case and may vary depending on the fiduciary’s exercise of discretion. However, in these circumstances, we note that appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator’s determination of whether the order is a QDRO under ERISA.5(5) The plan administrator’s ultimate treatment of the order could then be guided by the State court or agency’s response as to the validity of the order under State law. If, however, the administrator is unable to obtain a response from the court or agency within a reasonable time, the administrator may not independently determine that the order is not valid under State law and therefore is not a “domestic relations order” under section 206(d)(3)(C), but should rather proceed with the determination of whether the order is a QDRO." 

>>>>>>>>>>>>>>>>>>>

I can tell you from personal experience that Plan Administrators including OPM and DFAS will not process a Participant's retirement if they have any knowledge that there is even the possibility of a QDRO "out there".  Such knowledge may come to them because the Participant may have notified the HR department to drop a spouse from health insurance coverage because they are divorced.  The file is flagged from something as little as that.  

And I have never heard the 18 month rule cited as a "drop dead date" where the Plan's obligation as a fiduciary to the Participant and the Alternate Payee can be disregarded. 

But perhaps the bottom line is that the underlying obligation of the Participant to pay pension or retirement money to the Alternate Payee is not the QDRO, but the Marital Settlement Agreement or the Judgment of Divorce.  The QDRO in most states is regarded as an enforcement tool similar to a garnishment or an attachment.  See, e.g. Rohrbeck v. Rohrbeck.  https://scholar.google.com/scholar_case?case=6821439692749566017&q=rorhbeck&hl=en&as_sdt=4,21

So if the Participant rolled over his account to an IRA, the Alternate Payee could obtain a new QDRO and serve it on the new IRA custodian, unless, of course, the Court does not have the jurisdiction to enter an Amended QDRO because of, e.g, the state statute of limitations, or the doctrine of laches, or the doctrines of res judicata or collateral estoppel, or because the court did not expressly reserve jurisdiction to do so, or because Court Rules of Procedure placed time limits on how long a party had to ask the court to revise or correct a court order, or because in that state fraud, mistake or irregularity will not avail to extend any of these cut off date.   

If for some reason no DRO was ever qualified by the Plan, the Participant's obligation would remain.  For example, the Military has a 10/10 year rule, that is, unless the marriage of the parties and the years of service by the Member overlap by 10 years, DFAS will not honor a Military Retired Pay Division Order for the payment of the Former Spouse's share of retired pay (but they will honor the SBP part)....period, full stop.   The parties have to find a workaround. 

You may ultimately be found to be blameless, but it will come at a high price.  

David

 

FAQ - 18 Month Rule.pdf

Link to comment
Share on other sites

  • 2 weeks later...
On 5/31/2022 at 8:33 PM, Hope said:

Should the wife return the funds to the plan that has been discharged per the letters?

Agree with Nate S. Assuming wife acknowledges ex-spouse's interest in a portion of the funds, it is probably still possible to divvy up the IRA without incurring tax under IRC sec. 408(d)(6). Division of IRA needs to be "incident" to divorce, so probably would want the divorce decree amended to specifically provide for division of IRA and would need to confirm with IRA custodian that they would treat the division as nontaxable under 408(d)(6). Of course, the overall facts and circumstances of the parties, etc., need to be considered. I am just pointing out that 408(d)(6) may be available and the parties should check it out.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

Link to comment
Share on other sites

On 6/1/2022 at 8:59 AM, Dave Baker said:

I'm having a great deal of trouble understanding the text of your question.

Two letters were sent by the plan administrator -- to whom? The letters were sent to participate and the alternate Payee

Could you type (as a reply) the text of those letters (just put a blank line where names and addresses appear)?

Dear Mr.

This firm is counsel to the ====== Pension Trust -  Money Purchase Benefit Plan ("Plan"). In response

to your letter to the Plan dated            , 2022 concerning your client, =       and 

requesting  confirmation  that  there  are no  longer  any  funds  available  for  distribution  to

 an alternate payee, this will confirm that consistent with the Plan's rules,                                 application for benefits was processed,  and his account  balance was distributed  to                in October 2021.   At the time of the distribution, there was no entered QDRO order that satisfied  the requirements  of a qualified domestic relations order under ERISA ("QDRO").  As the Plan Office previously  explained  to you, your office was advised  in a phone call with us On                      2021, that unless the Plan received  an entered court order that satisfied the requirements of  a "qualified domestic relations order" under ERISA ("QDRO"), the Plan was required to  process                  application  for  benefits.  We  further  advised  that  if                          submitted  an  application  for  a  distribution  of                               full account  balance  from  the  Plan before  the  Plan  received  an  entered  QDRO,  the  full  account  balance  would  be  available  for distribution to                   after          completed  the necessary documentation. The parties were advised of this status again by letter from the Plan dated October 4, 2021. By letter dated October 6, 2021, the Plan advised  you that the draft, proposed  order you submitted  to the Plan for review would satisfy the requirements of a QDRO if it was entered by a court as drafted. As explained  in the Plan's letters to you dated  October  14 and  October  28, 2021, at the time                  submitted the necessary paperwork to apply for benefits, there was no entered QDRO in place directing the Plan  to  pay  benefits  to  anyone  other  than                   application for benefits was processed and                   full account balance was distributed.

I am assuming that the wife is the participant here. Correct? yes

The participant has been waiting 6 years, I see. Please explain when the 6-year period started. I'm not sure what the significance is. June 29, 2016 date of divorce

You say the attorney who did not file the QDRO; are you saying the attorney for the participant's husband did not provide a copy of the order, signed by a judge, to the plan until 5 days after the funds were distributed to the wife (via a rollover, I believe you said)? He sent a time stamped signed QDRO but not certified per the email from the plan admin stated: For your records The time stamped . When plan Admin was asked if the QDRO submitted was a certified one, they stated they only had 1 QDRO certified which was the one done for the Pension plan years earlier. Then I ask if the attorney knew that it was not certified and the Plan Admin stated they have nothing more to do with it because they have no account with  them anymore.

The attorney has filed contempt charges stating that the funds were taken out of the plan knowing the obligation to his client was not paid. I explained to the Judge that counsel had held this up for almost 8 years now because of interest and gain's as the QDRO for Money Purchase plan has approved QDRO's and asked for the certified copy signed by the Judge for almost 8 years now and the Plan Admin had sent them letters with the first on in 2020 stating that they could no longer hold the money in the account of the participate and if they asked for the distribution then they would provide that. So The letter above from the attorney's for the plan just fail to mention the letter in 2020 being the first. In fact after that letter I did email my spouse attorney and asked to fix the issues that made the QDRO not conform as he put it and they never responded and then added a Order Incident that added more money to the QDRO which was the obligations I had to pay (my half to the QDRO attorney and other things) were all added together and made one lump sum to be paid. That was in 2020 and he never provided the Certified Copy of the signed QDRO as the plan admin had approved the draft sent after that hearing. 

I have not been able to get an attorney so I am do this on my own. 2 attorneys and 1 was working against me. Very long story but case is old and a mess.

What do you mean by "funds to the plan that has been discharged per the letters" -- what does "discharged" mean here? And what do you mean by "per the letters"?

I know the Department of Labor has published two documents for the general public about the 18-month rule --Thank you for the help. 

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/qdro-determining-qualified-status-and-paying-benefits.pdf 

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/qdros.pdf

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...