QDRO now IRA - Settlement Agreement

[Nicole777]

P and K divorced 7/29/15. Decree says P is to split 401k from marriage 1997 to divorce w k.  QDRO finally started in 11/23, signed by courts 3/24. 401k plan transferred to IRA by P’s previous Employer. Unknown to both P and K.
 

QDRO relates to 401k not IRA and does not correspond with decree, (K manipulated documents and P signed thinking the had to match decree or courts wouldn’t have signed, not the case) So it’s a blessing that it got transferred to an IRA. When P contacted 401k company-Fidelity to see if QDRO was being processed in March, that is when he found out about it being transferred to Insperia Financial as an IRA. That company does not process QDRO and Ca Labor Retirement Service stated that QDRO is not Valid as it relates to a 401k not and IRA. Insperia Financial says that P and K have to agree on either a percentage or an amount. Funds are locked down until then.

k won’t sign unless the split of the 401k includes Child Support and Alimony as well. K has now levied P bank acct for child support and on Sept 9 a withholding order will take the total child support from his IRA, K is willing to sign for a lump sum agreed amount.
 

Question: Can a settlement agreement be made, staying the they agree on this amount, and that it covers the split, child support, and alimony. Have them both sign with notary. Is that legal to be done? If so do you know someone who could it?

[Gina Alsdorf]

This is the kind of question that truly needs legal advice from someone who knows the case well.  Someone should go back to their divorce attorney to ask this question. To the extent the IRA will be split, it would be smart to proactively get the requirements from the IRA provider for splitting the account, some of them require an order with specific format/language like a QDRO to split even though it isn't technically a qualified plan.   

[fmsinc]

See my comments in bold type.

P and K divorced 7/29/15. Decree says P is to split 401k from marriage 1997 to divorce w k.  QDRO finally started in 11/23, signed by courts 3/24. 401k plan transferred to IRA by P’s previous Employer. Unknown to both P and K.

What do P and K stand for?  

QDRO relates to 401k not IRA and does not correspond with decree, (K manipulated documents and P signed thinking the had to match decree or courts wouldn’t have signed, not the case) So it’s a blessing that it got transferred to an IRA. When P contacted 401k company-Fidelity to see if QDRO was being processed in March, that is when he found out about it being transferred to Insperia Financial as an IRA. That company does not process QDRO and Ca Labor Retirement Service stated that QDRO is not Valid as it relates to a 401k not and IRA. Insperia Financial says that P and K have to agree on either a percentage or an amount. Funds are locked down until then.  Most large IRA custodians do not require a court order to transfer IRA account balances in connection with a divorce.  They have their own forms. See attached Fidelity form.  I cannot find a comparable form at the website of Insperia Financial.  That doesn't mean that they don't have one.  You will have to contract them and ask.  The problem is that all of the forms require the parties to attach a copy of the Court Order or Judgment of Divorce that directs the transfer.  Here is a pretty generic Order to transfer IRA account balances.  The first problem you have is that the 401(k) Order cannot be used to to transfer IRA balances.  You need a new Court Order. 

Will the court have jurisdiction to enter a new Order?  Good question.  The law will vary in different states.  There may be a statute of limitations that will deprive the court of jurisdiction, or the doctrine of laches may apply, of the trial court may not have expressly retained jurisdiction to enter a new order.   

One other problem you may encounter is that IRA custodians are unable or unwilling to adjust for gains and losses (like a 401(k) or other defined contribution plan will do) and you will have to present evidence that the 401(k) would have increased in value from the valuation date to the date you client receives her share.  Likely an stockbroker or financial analyst or CPA will need to testify. See my Gains and Losses Memo. 

 

And as soon as you file a court proceeding you may find that the Participant will move his IRA to a bank in his brother's name is Toronto, or will take it out and hide it under a mattress or in a bank in Tierra del Fuego. 

You can always file suit against the Participant for contempt and ask for a just with pre-judgment interest at your state's legal judgment rate. 

And while you are filing suit, file a claim with the grievance commission in your state and allege that the attorney failed to adhever the the competence requirements of the Rules of Professional Competence, and file for malpractice as well. Here are a number of documents that relate to the standard of care, not only in Maryland, but nationwide.  See particularly the Memo re: Consequences of Delay. 

k won’t sign unless the split of the 401k includes Child Support and Alimony as well. K has now levied P bank acct for child support and on Sept 9 a withholding order will take the total child support from his IRA, K is willing to sign for a lump sum agreed amount. Allocation of retirement and pension benefits have nothing to do with child support and alimony, unless of court the purpose of the transfer was to recover alimony and/or child support arrears. In most states the payment of child support is viewed as a DUTY while the payment of retirement benefits is viewed as a debt.  

Good luck,

David
 

Question: Can a settlement agreement be made, staying the they agree on this amount, and that it covers the split, child support, and alimony. Have them both sign with notary. Is that legal to be done? If so do you know someone who could it?

Fidelity IRA Form.pdf DRAFT IRA ORDER.pdf Grievance Comn v. Fisher.pdf Grievance Comn v. Gray.pdf Grievance Comn v. Hill.pdf Grievance Comn v. Kovacic.pdf Grievance Comn v. Tolar.pdf JLG Article - It Ain't Over.pdf List of Defined Contribution & Benefit Plans- Qualified or Not - 6-4-21 (3).pdf Malpractive - Lawyer Liability in QDRO Cases - Willick (1).pdf Notice of Adverse Claim- Interest Cover Letter (2).pdf Notice of Adverse Claim-Interest.pdf Potts re Time to Prepare QDRO.pdf QDROS -MALPRACTICE AND RULES OF PROFESSIONAL CONDUCT.pdf Shulman QDRO Handbook Table of Contents 2020 (1).pdf Top-QDRO-Mistakes-Attorneys-Make-and-How-to-Avoid-Them (1) (2).pdf CONSEQUENCES OF DELAY 04-15-24.pdf Gains, Losses, Investment Exp - 09-29-2022.pdf