Texas Divorce: TIAA subtraction formula for 403(b).

[MacroQu]

Edit: I have received the answers I needed and am removing the details of my situation for privacy. Thank you to those who helped.

 

 

 

 

 

 

[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.

[MacroQu]

First, I want to own my mistake in the original post: I was completely wrong to include that decree clause about "gains and losses." That language strictly applied to a separate contract (Contract #1) and I should never have muddied the waters by including it here. You were entirely right to point out how confusing that was. For Contract #2 (the PA University 403b), the Date of Marriage baseline is undisputed and fully on the record.

With that cleared up, I want to thank you for this excellent insight. Your explanation regarding the investment provider's algorithms and their reluctance to assume liability for historical calculations makes perfect sense. It validates my suspicion that TIAA's rejection of the subtraction wording is a purely administrative and liability-avoidance measure, rather than a flaw in the legal tracing method itself.

Knowing that this is a recognized industry hurdle reinforces my strategy to bypass their system entirely. I will be proceeding with an Agreed Fixed-Dollar DRO, effectively doing the math for them to avoid further delays. I greatly appreciate you taking the time to share your expertise on how these providers operate behind the scenes.