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Divorce agreement, but no DRO. OK to distribute?


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In Connecticut, a husband and wife can have what is called a "mediated divorce", wherein the court appoints a mediator and the happy couple agrees who gets what. The mediator prepares documents for the court to sign that, among other things, provides for a distribution to the former spouse from the qualified plan. This document is not a DRO and I'm not convinced the plan should accept it. Obviously, the participant does not wish to incur attorney fees, but I am inclined to insist on a real DRO before processing the distribution. Question is - is there any type of agreement, other than a QDRO that would be acceptable? I have heard that in some instances, there is.

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A QDRO is determined by the Plan Administrator. Even if a DRO is deficient in technicalities and the PA can fill in the information, the PA can determine it is a QDRO. In my opinion as a non attorney, if the divorce settlement spells out enoough detail to cover the requirements of a QDRO, the the PA can determine it to be a QDRO.

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MR, it's hard to believe that Connecticut law does not make the enforceability of a marital property settlement (in a Connecticut court) conditional on entry of an order by a family law court pursuant to a domestic relations proceeding, which includes the mediator's report to the court. The lawyer for the nonemployee spouse who fails to request the court to issue such an order based on the terms of the settlement would, at least, in California probably be liable for malpractice. Something seems to falling off the sled in this process and your comments suggest that the parties have probably tried to do this as "cheaply" as possible (that's cheap in terms of attorney fees in the short run), by stopping short of seeking an order confirming the agreement, based on the assumption (probably erroneous) they can go back to court to enforce the terms of the agreement against a breaching party or a third party who fails to respect the terms of the agreement. All of this, of course, is really a nonissue for the Plan Administrator, who has no axe to grind in the process of QDRO determination. If the plan has a model QDRO, supply it to the attorneys for the parties with a copy of the SPD and the plan's QDRO determination procedures. I'd recommend that you inform the parties that both ERISA and the Internal Revenue Code provide that, until the plan receives a dometic relations order entered by the court, the QDRO determination process cannot begin.

Phil Koehler

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I think that the definition of a DRO (which, of course, can become a QDRO) uses the terms, "order", "judgment" or "decree". To a mere lawyer, those terms of art indicate something approved and signed by a judge of a court of competent jurisdiction. In MR's question, the mediator prepares documents for signature by the appropriate domestic relations court, so the mediator is merely preparing a "consent" DRO for signature by the family law judge. Assuming I was asked by the plan administrators I counsel, I would tell them that if it's not signed by a judge, it isn't a domestic relations order, judgment or decree and it cannot, by definition, become a QDRO.

This is not just an academic point. Mess this up and you've violated the anti-alienation rules in ERISA and the Code.

Phil's suggestions about easing the way for the participant and the soon-to-be alternate payee by providing form language for a QDRO to the parties, the mediator, counsel or even the judge make the process less costly and less likely to require rejection by the PA.

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Sounds like well-reasoned advice from Phil and Hank.

But a followup, has the ABA or any other legal organization, created a "model QDRO"?

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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pax, I know that many local bar organizations have domestic relations subgroups which provide "model" QDRO language as well as training to practitioners to know the QDRO rules. I don't think the ABA has model language, however.

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pax, the PWBA has made its publication on the QDRO preparation process available on its website. It includes instructions for drafting a QDRO, relevant ERISA Advisory Opinion Letters and a copy of the IRS sample QDRO language published in Notice 97-11. It's probably worth checking this out, if you haven't already prepared a model QDRO for this particular plan.[Edited by PJK on 09-05-2000 at 01:25 PM]

Phil Koehler

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