Texas Divorce: TIAA rejected subtraction formula for 403(b). Attorney exploring coverture, but I proposed Agreed Fixed-Dollar. Advice?

[MacroQu]

The Situation:

I am the Alternate Payee in a Texas divorce (community property state). My ex-spouse holds two TIAA-CREF Retirement Annuity (RA) contracts from two different universities. Both are 403(b) Defined Contribution plans.

• Contract 1 (University A): 100% marital property. A straight 55% split is uncontested and straight forward.
• Contract 2 (PA University): Mixed asset. He had a substantial six-figure separate property baseline on our Date of Marriage. Crucially, all active contributions to this account stopped in the fall of 2015 due to move to Texas, but the account continues to generate significant daily interest that I am entitled to. The divorce date 11/2025.

The Decree:

The decree explicitly awards me: "55% of the community property interest of the total vested account balance as of the date of transfer... including any interest, dividends, gains, or losses on that amount arising since that date." The Qdro will have to address “since that date” more precisely.

The Roadblock (TIAA Verbal Rejection):

My family attorney initially worked on a standard subtraction formula for the PA university account (Current Balance minus Date of Marriage Balance = Marital Growth). However, before presenting a formal draft, he received a verbal rejection from TIAA administrators, who stated they will only accept a QDRO written as a "fixed dollar amount or a percentage." I believe the family attorney's wording to TIAA didn't satisfy their standard subtraction formula wording.

Because of this, my attorney is now asking for the total months we were married while he contributed. It appears he is looking to apply a time-based coverture fraction to satisfy TIAA's request for a percentage. However, I am opposed to utilizing a coverture fraction. Applying time-based math to an inactive 403(b) completely ignores his massive pre-marital baseline and results in a severe financial loss for me under Texas tracing rules. TIAA doesn’t allow coverture fraction but could blindly accept his marital fraction math. The losses would be in the six-figure range.

My Proposed Workaround & The Communication Breakdown:

It is possible my attorney is attempting to re-word the subtraction/subtrahend method to get TIAA to accept it, but I have provided specific language for that and received no response.

Given that this process is being drawn out and the daily interest has not stopped, it is not in my best interest to accept a static fixed-dollar amount without accounting for the daily interest the account is actively generating while we wait. Therefore, I proposed we execute a Fixed-Dollar Agreed QDRO. I calculated the exact subtraction math, applied my 55% share, and added a projected daily interest buffer (based on the account's current known yield) to cover the estimated administrative processing time. Approximately 2.5 months from initial filing a Dro draft with TIAA, then to judge for a QDRO and TIAA review period of that QDRO to the final Date of Transfer.

Unfortunately, communication has stalled. It has now been 5 months since the divorce was finalized, and my attorney has not responded to my proposed fixed-dollar workaround or my subtraction wording suggestions for 3 weeks. Attorney actively been working on the DRO since April 1st.

My Questions for the Experts:

Question 1: Given TIAA's verbal pushback, is there a specific way to draft the "subtrahend / subtraction method" that TIAA administrators will actually except for a mixed-asset RA contract, or do they truly force a fixed dollar/percentage?

Question 2: If TIAA refuses subtraction math, is the "Fixed-Dollar Agreed QDRO" (where the ex-spouse and I agree to calculate the processing time interest privately, and submit only the final, combined flat number to TIAA) the standard and most equitable strategy to protect the Alternate Payee's award?

Question 3: Is there any defensible legal reason for an attorney to apply a time-based coverture fraction to an inactive TIAA 403(b) under Texas law, or is he simply trying to appease TIAA's demand for a percentage?

 

[fmsinc]

Check out https://www.tiaa.org/public/pdf/q/QDRO_approval_guidelines.pdf

https://www.tiaa.org/public/support/faqs/retirement-divorce

https://www.tiaa.org/content/dam/tiaa/global/doc/word/DA_QDRO.doc

https://www.tiaa.org/content/dam/tiaa/global/doc/word/IA_QDRO.doc

https://www.tiaa.org/content/dam/tiaa/global/doc/word/IRA_QDRO.doc

TIAA will no longer will compute gains and losses for DA accounts. See the Guidelines paragraph  5.a.iv. 

See my attached Memo

In this regard they are following the lead of IRA custodians.  

David

 

TIAA CREF Issue - Gains and Losses.pdf

[QDROphile]

While I think the move by TIAA sucks because the investment provider is in the best position to approximate earnings and losses from a specified valuation date and dumping the exercise on the divorcing parties is confusing and expensive, it highlights the reality* that the “usual” calculation earnings and losses from a date has almost always been somewhat illusory. Check some other posts in this forum about the use of algorithms for that purpose and how they can be rather inaccurate, depending on the circumstances. Perhaps it is unrealistic to expect true, rather than approximate, but reasonable,  calculation of earnings and losses. Maybe the providers simply don’t want the exposure of appearing to look like they are doing actual and true calculations as opposed to reasonable approximations.

This problem has been evident for a long time when a plan changes providers. If the valuation date is under the prior provider regime, the plan often has no means to go back into that history to bring down (up?) the calculations to the date the new provider is presented with participant balances, because, among other reasons, they did not think of it, was not an available service from the prior provider, or is not a service available from the new provider (who does not have all that historical data loaded into its system). The burden falls on the individuals to account for the gap between the valuation date and the commencement date with the new provider.
 

Disclaimer: I do not know the systems and methods of investment providers for calculating earnings and losses forward from a valuation date to a “transfer” or “separation” date. Others have asserted that imperfect algorithms are used. The assertions make sense to me based on my witnessing of third party attempts to calculate earnings and losses from the data of the investment provider. It is possible that some or most investment providers have systems that can actually provide accurate figures for earnings and losses from a valuation date to some other date. I have plenty of experience with plans that have changed providers and create problems for the individuals because of the difficulty of working with historical data that is no longer in an active system.

One lesson from all of this is that if one divorces, the division of the retirement benefits should be attended to as promptly as possible. That will minimize many problems. Unfortunately, a QDRO is often an afterthought.