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Plan administrator changes in the QDRO process?


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Plan administrator switched in the middle of the QDRO process with my old employer. HR at my old company says new plan administrator wants everything re-done. Do I need re-do QDRO, get court submission / approval done again, and then resubmit to HR? My retirement assets were basically frozen when I submitted it, but HR says it has to be redone: new plan administrator wouldn't process it due to gains losses unknown because it was with old plans administrator,  said qdro needs redone and plan name changed to new plan adminstrator since it was converted.

thank you

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You should not have to do anything new with a domestic relations order that has been submitted. The plan is required to process it. However, the new "processor" might derail what was on track for qualification and decide it is not qualified. Then you have to resubmit within whatever new legitimate administrative policies and limitations apply under the new processor. Or you can challenge. 

The decision might rest, unfairly, on the style and arrogance of the processor. We could talk about how a lot of the processors, like Fidelity, suck to the point that the plan may not comply with the law. And we could speculate about whether or not your DRO can be whipsawed by changes at this point. But the plan usually holds the better cards unless you have either lots of resources or a a very confident aggressive competent lawyer who is willing to work for an attorney's fee award.

If you have submitted a DRO, just wait for the plan to make its move based on the determination of qualification that it is required to perform, and then decide what to do. You will have to be given a written explanation, which you can challenge, or you can choose to conform. Don't listen to informal buzz outside of the actual terms of the formal determination, the Summary Plan Description, and and written QDRO procedures.

If you are somewhere else in the process, such as having informally submitted a draft DRO for "pre-qualification" (it pains me to use that phrase) then you might get jerked around more. The plan still has to follow the written QDRO procedures. You are entitled to them.  Check them against what you are being told. By the way, the plan's written QDRO procedures probably also suck. Sorry. This is not an area where third-party providers (the big ones, anyway) are very enlightened.

This is also an opportunity to gratuitously knock the Department of Labor. It just can't get QDRO stuff right. But at least its bias tends to be against the plan because it gets asked for help mostly from would-be alternate payees, and plans -- especially union plans -- can be obtuse), so for you it might be considered an ally. You probably don't have a fight yet, and chances are the DOL is not itching to get in one with you.

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Thanks. Going back to the tax guy that prepared it and see what he says ref. having to change the name to the new administrator and the gains / losses. Magistrate already approved the old QDRO with the old admisnistrator on it.

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Yes, advice from QDROphile is good (as usual).  Other points:

  1. Since there is a new "administrator", there might be new QDRO procedures.  Ask.
  2. The name/identity of the "new plan administrator" is (likely) irrelevant to what goes in any QDRO.  You might need a new address, but it should not impact the content of the DRO and/or 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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JH, your description suggests there might not have been a change in the plan’s legally named administrator. (The word has different meanings following whether the usage is ordinary English, business English, or the Federal statutes’ specially defined term.) Rather, a change might be about a service provider.

Even if there is no change in the plan’s administrator, follow the cautions about a possibility (many might say a likelihood) of change in the plan’s domestic-relations-order procedures.

If you want a division processed (or a hold or freeze lifted), consider that a lawyer might navigate the plan’s provisions and procedures (perhaps practically including the service provider’s ways) more skillfully than you might.

Nothing in this is accounting, tax, or legal advice to anyone.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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26 USC 414(p)(2) provides: 

“(2) Order must clearly specify certain facts - A domestic relations order meets the requirements of this paragraph only if such order clearly specifies—

            “(A) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,

            “(B) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,

            “(C) the number of payments or period to which such order applies, and

            “(D) each plan to which such order applies."

That is all you need to have in a QDRO for it to be acceptable to the Plan Administrator.  See Festini-Steele v. Exxonmobil Corporation, No. 20-1052, __F.App'x__, 2021 WL 629755 (10th Cir. Feb. 18, 2021) that you can find at -

 https://scholar.google.com/scholar_case?case=9213427610449703594&q=Festini-Steele+v.+Exxonmobil+Corporation&hl=en&as_sdt=20000003

The Plan Administrator may want more information, and I always give it to them, but technically it's not required.  

But that does not seem to be your problem.  You obviously have a defined contribution plan and need to change the name of the Plan and the Plan Administrators, but the need to adjust for gains and losses is the problem.

I have had many cases where the entry of a QDRO was delayed for many year, often 10 or 20 years or more and during that time the Plan Administrator changed.  When I asked for their QDRO package pursuant to  ERISA Section 206(d)(3)(G)(ii), they advised me that the Valuation Date from which gains, losses and investment experience were to be computed could not be prior to the date the new Plan Administrator took over.  The explained quite logically that they did not have the information to make those calculations.    

Keep in mind that I was not usually talking to the actual Plan Administrator, an employee of the Plan Sponsor, but to a Third Party Administrator (TPA) like Fidelity or MassMutual or Voya or Vanguard or WTW.

What do do?   I could just use the date the new TPA took over and leave it at that.  If the market value of the assets in the Plan had decreased, that would be best for the Alternate Payee.  I don't know that I had any other option in dealing with the new TPA.     

I could tell the client to sue his former attorney (assuming he had one) for malpractice and report him to the State Grievance Commission for a violation of the Rules of Professional Conduct (competence).  Failure to process a QDRO is a timely manner will get you sued every time.  The problem will be how to compute the damages, that is, the gains, losses and investment experience from the Valuation Date set forth in the original Marital Settlement Agreement (MSA) or, in the absence of the MSA, in the Judgment of Absolute Divorce (JAD),  to the new TPA take over date. 

One method is to take the value of the account as of the original Valuation date and use an average of the Dow Jones, NASDAQ,  S&P 500 and Moody’s bond rate each month year to bring that amount up to the date of the new TPA take over.  Then the gains and losses would be computed from that date to the date of rollover or distribution to the Alternate Payee. 

There is authority for that approach in Maryland in the case of  Reynolds v. Reynolds, 216 Md. App. 205, 85 A. 3d 350 (2014) where the appellate court held that: "We agree that a trial court could, in principle, attribute a reasonable rate of return to assets, and that the rate on U.S. Treasuries would be a conservative estimate of returns for nearly any asset."   The Treasury rate tends to be a little low, but I have have used a financial analyst at UBS to make such a computation.  Not perfect, but it wasn't much money and it saved litigation costs.  See attached.

If you are negotiating with the malpractice carrier for the negligent attorney you will find that they will settle rather that run the risk of a nisi prius (lower court) or appellate judgment.    

DSG

01-19-2024

Smith Case Growth Computation..pdf

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Tring to go back to the old plan administrator now. New administrator (major financial firm) says they are unable to calculate gains and losses when it was submitted.                fmsinc: thanks for the details. I will try the "One method is to take the value of the account as of the original Valuation date and use an average of the Dow Jones, NASDAQ,  S&P 500 and Moody’s bond rate each month year to bring that amount up to the date of the new TPA take over.  Then the gains and losses would be computed from that date to the date of rollover or distribution to the Alternate Payee. ".

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Assuming that "One method is to take the value of the account as of the original Valuation date and use an average of the Dow Jones, NASDAQ,  S&P 500 and Moody’s bond rate each month year to bring that amount up to the date of the new TPA take over.  Then the gains and losses would be computed from that date to the date of rollover or distribution to the Alternate Payee" would work if the other partner to the QDRO accepts / signs it?

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