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Failure to Promptly Notify Participant

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We have a situation where we may have failed to promptly notify a participant of receipt of a QDRO.  He claims he first became aware after the QDRO was qualified (but it hasn't yet been processed, though we're about to).  

If true, is there a penalty associated with the failure?

I assume that the AP isn't penalized and we can still process the QDRO, even if there is a penalty on the Administrator.  Is this correct?

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If the plan’s administrator has not yet instructed a distribution to an alternate payee and has not yet instructed a segregation of accounts between the participant and an alternate payee, consider doing now whatever notices and other procedural steps ought to have been done when the administrator first received the domestic-relations order.

Further, the administrator might want its lawyer’s advice about whether to allow the participant a reasonable time to present whatever factual information or legal argument the participant wishes to present to assert that the order is not a qualified domestic-relations order. In my experience, few participants assert that a court’s order is not a qualified domestic-relations order.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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In the DOL, EBSA publication, "QDROs The Division of Retirement Benefits Through Qualified Domestic Relations Orders" at question 1-13 it provides: 

Q 1-13:Who determines whether an order is a QDRO?

Under Federal law, the administrator of the retirement plan that provides the benefits affected by an order is the individual (or entity) initially responsible for determining whether a domestic relations order is a QDRO. Plan administrators have specific responsibilities and duties with respect to determining whether a domestic relations order is a QDRO. Plan administrators, as plan fiduciaries, are required to discharge their duties prudently and solely in the interest of plan participants and beneficiaries. Among other things, plans must establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions pursuant to qualified orders. Administrators are required to follow the plan’s procedures for making QDRO determinations. Administrators also are required to furnish notice to participants and alternate payees of the receipt of a domestic relations order and to furnish a copy of the plan’s procedures for determining the qualified status of such orders. See Chapter 2 for a detailed discussion of the duties and responsibilities of plan administrators in making QDRO determinations.  

It is the view of the Department of Labor that a state court (or other state agency or instrumentality with the authority to issue domestic relations orders) does not have jurisdiction to determine whether an issued domestic relations order constitutes a “qualified domestic relations order.” In the view of the Department, jurisdiction to challenge a plan administrator’s decision about the qualified status of an order lies exclusively in Federal court.

[ERISA §§ 206(d)(3)(G)(i) and (ii), 404(a), 502(a)(3), 502(e), 514; IRC § 414(p)(6)(A)(ii)]

...and read Section 2-14.  

These may not be the most authoritative source for the Plan Administrator's obligations, but for the purposes of your question it's sufficient.  Peter is right.  Go back to scratch and do what is required by the Plan documents. 

While you are at it, read Advisory Opinions 1992-17A and 1999-13A, attached, with respect to the obligation of the Plan Administrator to determine if a DRO is a QDRO.   



Advisory Opinion 1992-17A - duty of Plan Admin.pdf Advisory Opinion 1999-13A _ U.S - Sham Divorces.pdf

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