discovery of a lie during the divorce proceedings

[AlbanyConsultant]

This is for a cash balance plan, so QJ&S applies.

Participant J and spouse S got divorced in 2016.  There was no QDRO because as part of the divorce, S waived her rights to J's benefits (kind of...), so nothing was ever provided to the plan sponsor or us as TPA.  We never knew or cared about this.

Fast forward to now and we're terminating the CB plan.  J calls us because the standard distribution package asks for the spouse to sign if married.  J says that he was married, but now he's concerned because in the divorce paperwork, it clearly says that S waives her right to J's benefit in the 401k plan, and that J attests that he is a participant in no other retirement plans.  Like many participants, J didn't understand what the CB plan really was.

[It's not relevent, but at the time his balance in the 401k plan was $20K and his lump sum benefit in the CB plan was $3K.]

Now J and the plan sponsor are wondering what to do.  Obviously, the best answer is "check with an attorney".  I told them without a legal opinion or a QDRO, we can't split J's CB payment.

Any other suggestions?  Thanks.

[david rigby]

Divorced in 2016, but terminating the plan now?  Why is J's former spouse relevant?  

[QDROphile]

As far as the plan is concerned, he is not married. The plan termination can proceed accordingly unless the plan receives a domestic relations order during the process. The plan should not wait.
 

With respect to the participant and the former marriage and its termination, the participant is on his own with respect to any remedial action. That remedial action may include something in the state domestic relations court, but it is unlikely to be within time to produce a domestic relations order that can be effective with respect to the plan. The participant will probably have to find some other remedy for his ignorance. Whether or not that remedy is processed through the domestic relations court depends on the court jurisdiction and rules. Typically there is not an unlimited look back opportunity. Fraud would provide the best avenue, but then the participant would have to claim something more sinister than ignorance and potentially suffer greater consequences in the outcome.

[fmsinc]

I am sorry but I don't understand what sort of plan you are talking about.  A cash balance plan under ERISA is a defined benefit plan that has a cash value component similar to a defined contribution plan and is therefore a hybrid form of both forms. See attached.  So I don't understand your comment about a 401(k) plan with one value and a cash balance with a lesser value, unless, however you are talking about Secure 2.0 options adopted in a defined contribution plan.  There are about 175,000 pension and retirement plans in the US (not including IRAs) so details are important. 

So it would be nice to know if this is a ERISA qualified plan (not church and not union).

It would be nice to know why you mentioned QJSA?  Did the Plan also have a QPSA?  If not, how can that be?

It would be nice to know HOW the alternate payee waived his/her rights:

(i) in a written marital settlement agreement?;

(ii) in a mediated Memo of Understanding?;

(iii) in an agreement read into the record in open court?;

(iv) in the Judgment of Divorce incorporating but not merging "(i)", "(ii)" or "(iii)"?;

(v) in the silence of the Judgment of Divorce about the allocation of pension or retirement benefits?;

(vi) in the affirmative statement in the Judgment of Divorce setting forth the non-allocation of pension or retirement benefits?. 

And it would be nice to know whether the divorce and the waiver took place at the time of the Participant's retirement, in which event such a waiver might not survivor a later divorce. 

And it would be nice to know if the waiver included the EXACT name of the plan?  Northrop Grumman has dozens of different plans. See attached.   

It would be nice to know if there is a statute of limitations with respect to the entry of a QDRO in your jurisdiction?

Keep in mind that you have a fiduciary duty to the Participant and to the Alternate Payee anyone who might become an Alternate Payee.  Especially is that the case where you have ACTUAL KNOWLEDGE that there is a potential Alternate Payee.  The Participant in your case gave you just enough information to put you in the hot seat. No longer can you rely on your role being merely ministerial. 

Check with your attorney and my guess is that they will tell you to do nothing until parties agree or the court decides the disputed issues?      

David

 

A Complete Guide to Cash Balance Plans _ October Three - October Three.pdf Northrop Grumman.csv