Small Business Plan Administrator Divorce (401k QDRO)

[Bucksin6]

The question I am asking relates to the divorce of the plan administrator and their former spouse, this case takes place in Wisconsin.

A brief overview of people involved:

• Person A: employee of company X, where they are not only the plan administrator but they are a partial owner (the other owners are family members as well)
• Person B: ex-spouse
• Lawyer A: Lawyer for Person A
• Fiduciary

Divorced was finalized in May of 2021.

In January of 2022, the QDRO was filed and signed off by the judge with a May 2021 valuation date (this is key point for later on). The QDRO was signed by Lawyer A, with a December 2022 date, however, court records show that they had withdrawn from the case in June of 2022.

• Does the dates above invalidate the QDRO? Since the signature date of Lawyer A doesn't make sense?

As of August 2025 the QDRO was never executed and the assets in Person A's 401k were never split, Person A has been contributing to the plan since the divorce was finalized. In order to get things finished and complete the QDRO, person B asked for plan documents to understand what they were entitled to do with the money owed to them (like rollover, cash out etc) as they had not been given ANY documents prior to this.

• Person A supplied a SPD dated August 2021 and claimed that was enough information and that was all they had.
  • Under Miscellaneous: Domestic Relations Orders - "You may obtain, without charge, a copy of the Plan's QDRO procedures from the Plan Administrator". If this document exists it hasn't been provided
• Person B spent weeks asking for more plan documents and then received a Adoption Agreement with the same effective date as the SPD (August 2021), Person A then stated again that they have provided everything they have and everything that Person B needs.
  • Only relevant information in this is that the valuation date is "Each Business Day"
• More correspondence over another few weeks led to Person A sending Person B a Basic Plan Document and again stating that is all they had and is everything Person B needed.
  • this document says copyright 2002-2020 through ftwilliam.com

ISSUE: The QDRO filed, signed by Lawyer A and the judge has a valuation date that is 99 days prior to the Adoption Agreement passed in August 2021. During the correspondence outlined above, Person A, has suggested to the fiduciary and Person A that the valuation date should actually be a different day in May 2021. This new valuation date conveniently falls within 90 days prior to the Adoption Agreement in August 2021.

Person A has repeatedly denied having any documents prior to the ones effective August 2021 and even asked the Fiduciary if they had any documents to try and avoid responsibility.

The question then is. With the dates and timelines given, what, if any, legal actions can Person B take? Is an ERISA lawyer the best way to handle this? Or is another kind of lawyer that is versed in small/family business better?

[QDROphile]

First, an overview observation, and then an attempt to give a helpful answer. As someone that you might refer to as a QDRO lawyer, I see a lot of information and query that I think is very unlikely to matter in terms of determining whether or not the domestic relations order is a QDRO, including different vintages of plan document. A 401(k) account is a relatively easy thing to divide from a qualification perspective, assuming conventional liquid assets. Plan terms usually have no substantial effect. Because of the excess of text that appears to be irrelevant, it seems that there is a lot of confusion. The confusion also appears involve identification of the relevant “fiduciary” or fiduciaries who will be responsible for cutting through all of the noise and making decisions about the domestic relations order as qualified or not.

The usual circumstances relating to a QDR involve two pieces: (1) what part of the 401(k) account will the alternate payee get? This has everything to do with the total divorce settlement and not necessarily anything to do with the terms of the 401(k) plan (except maybe vesting). The plan is totally agnostic about what the alternate payee should receive, except that the alternate payee cannot receive an amount or type of benefit that the plan does not provide for (which is a qualification matter and almost never an issue with a 401(k) plan). For determining the amount that the alternate payee should receive in the greater scheme of things, the parties need domestic relations, lawyers to come up with a domestic relations order that I will refer to you as the “divorce decree” which may or may not be the domestic relations order that is submitted to the plan to end up with a QDRO (probably not; see the explanation below about the role of the QDRO lawyer).

(2) A domestic relations order (DRO) must be submitted to the plan in order to tell the plan what the divorce decree specifies to be the interest in the plan awarded to the alternate payee. The DRO must set forth the information that the relevant statutes require, which neatly corresponds to the information that the plan administrator (or other QDRO fiduciary) actually needs to administer the DRO and give the alternate payee what the divorce decree has determined that the alternate payee should get. Unfortunately, a QDRO lawyer (or other competent professional) may be required to make sure that the formal qualification requirements are satisfied. A QDRO lawyer will be concerned with plan terms, but, as mentioned before, plan terms usually have little effect. An experienced QDRO lawyer can probably put together a perfectly good domestic relations order while being almost blind to plan terms — not that they actually would. A QDRO lawyer is indifferent to the settlement terms that relate to what the alternate payee “should” receive from a 401(k) plan as long as the the “what” is expressed in the accounts decree as a dollar amount or a percentage of the account balance as of a particular date. Valuation dates may be a matter affected by plan terms, which gets us to: 

(3) A common arrangement is for the domestic relations lawyer to have an association of sorts with a QDRO lawyer (or other professional), to make sure that the divorce decree defines the alternate payee’s interest in the plan in a way that can be implemented by the plan, such as by specifying a valuation date that is workable for the plan. The QDRO lawyer, then drafts a domestic relations order that meet the qualification requirements to become a QDRO.

So, the answer to your question is: both, especially since there seems to be so much confusion about what matters or not, and people seem to be enmeshed in a probably unnecessary push/pull. I am not unmindful of the misfortune that something that is conceptually quite simple ends up needing the assistance of expensive professionals to make things “right” whether or not anyone is made happy.

Important addendum:

No mention has been made of an extremely important document that plans are required to have: written procedures on qualified domestic relations orders (QDRO Procedures). If I were to have only one document from the plan, that is the one that I would request. However, while that document should be the most important and informative of all plan documents, that document often sucks and will disappoint. The QDRO Procedures may be incorporated into an SPD.

 

[justanotheradmin]

When a DRO is signed - and the asset valuation date (via date or otherwise) are two different things. The DRO might say the alternate payee gets 65% of the vested benefit as of November 17, 2019, with adjustments for earnings thereafter, but the actual DRO might be signed and recorded with the court years later. And the actual split of the money might be well after that. 

TL:DR

• Present the DRO - ask for copies of the QDRO policy and ETA on decision - get decision - get forms to get money out. 

 

Person B can perhaps start by giving a copy of the DRO that was filed with the court to the Plan Administrator (this person, can be an entity, business is usually listed in the SPD). If it is the EMPLOYER it is helpful if it is going to someone whose responsibilities include the retirement plan.

Person B might want to include a cover letter with the DRO - asking for a copy of the plan's QDRO procedures/policy, and confirmation that the DRO has been received by the Plan Administrator and that it will be reviewed. Ask for an ETA on when the DRO will be accepted as Qualified, or rejected. And include where the written acceptance or rejection should be sent to notify the alternate payee. 

Keep notes - and dates - and copies of correspondence. 

When the ETA passes - and no Acceptance or Rejection is received in writing - ask for an update, in writing. 
If DRO is accepted as Qualified - the Plan Administrator(or perhaps a recordkeeper) calculates how much the current account belongs to the alternate payee, and the segregates or tracks it separately.  Then the alternate payee asks for a distribution form, and can do whatever the plan allows with the money, often rolling it out into their own IRA. 

If the alternate payee disagrees with the amount that was segregated - then they can ask for supporting documentation, such as statements or what formula was used to arrive at the split amount. How much detail they receive will vary a lot based on a variety of factors. 

You do not mention where the plan's money is held. 

None of this is legal advice. Just a simplification of what to actually focus if someone wants to get the plan to review a DRO.