QDRO Interpretation

[ConnieStorer]

I am posting this message for my boss.  He is the one who normally reviews QDRO for our clients and advises if they can be implemented.  Attached is a summary of sections from the Divorce Decree and the QDRO draft.

Also included are comments made to the attorney regarding the QDRO along with the attorney's response.  We have some real issues with the attorney's response and wanted to reach out to the Benefit Links community for any insights.

Thanks in advance for all comments.

Not sure if it makes any difference but the participant stated to us that his spouse was entitled to the exact amount listed in the divorce decree, not a penny more or less.

Amount of Alternate Payee.docxAmount of Alternate Payee.docxAmount of Alternate Payee.docxAmount of Alternate Payee.docx

[david rigby]

I'm not sure you (or the plan) cares what is in the divorce order.  Look to the DRO (that hopes to become a QDRO) for any "instructions". 

I see a recipe for error if the attorney and/or the DRO expect the plan to use some "implied" standards or procedures.

[Peter Gulia]

Apart from other observations one might consider:

If the plan is ERISA-governed, the plan’s administrator (or its service provider, if it speaks for the administrator) might inform the inquiring domestic-relations lawyer:

A State-law construction aid that the absence of an expression means a measure includes gains and losses is useless for an order one wants treated as QDRO. ERISA alone governs how an ERISA-governed plan reacts to a State court’s order. An order that does not “clearly specify” its instruction cannot be a QDRO.

This is not advice to anyone.

[Calavera]

Here are my $0.02. I would agree with the attorney and disagree with your boss:

1. Process of a DRO qualification doesn't require a comparison between A DRO and a divorce decree.
2. You only need to determine if a DRO could be administered as written (along with other qualifications such as names, addresses, etc.).
3. Second paragraph of Item 6 is needed for a DRO, so it can be administered. Just imagine a case when the total account is less than the amount specified in a DRO. You will never be able to administer it. If you are certain that the total account is higher than the amount written in a DRO, then second paragraph has no impact.

3 hours ago, ConnieStorer said:

Not sure if it makes any difference but the participant stated to us that his spouse was entitled to the exact amount listed in the divorce decree, not a penny more or less.

4.  If the participant insists on a "non a penny less", the divorce decree will need to be amended to instruct what to do if the total account balance is less than the amount specified. However, you cannot pay more than is in the account, so the second paragraph of Item 6 is still needed.

[QDROphile]

I agree with Calavera, except I am more emphatic that the divorce decree language deserves absolutely no consideration. If the divorce decree was submitted with some suggestion that it had meaning with respect to the domestic relations order, the plan should state, as part of its interpretation of the domestic relations order, that the divorce decree was not considered in the process of determining qualification or the amount of the award.

I also believe that state law is irrelevant if it is an ERISA plan. If the DRO does not specify earnings and losses, then it is a sum certain. The participant’s opinion is irrelevant and the drafting lawyer is wrong if the lawyer expects an earnings adjustment.

I hope that the account services/investment provider is not Fidelity. Unless Fidelity’s policies have changed since my last encounter, it is impossible to pay a specified sum to an alternate payee. However, as much as this offends me, there should be no harm because, in the end, the alternate payee should receive a bit more without the participant receiving less if no one interferes.
 

[QDROphile]

Although I am critical of the drafting lawyer, I think it is an appropriate courtesy, as well as best practice, for the plan to communicate expressly that the awarded amount will not be adjusted for earnings and losses (setting the Fidelity problem aside). This is typically done in the notice that the DRO has been determined to be qualified and the relevant interpretations of how the plan will execute the QDRO. Given the communication history so far, that message might better be delivered in some other way before processing the DRO.

[ESOP Guy]

Add me to the voice your firm is doing too much work and opining on things it shouldn't.  We do not normally get and wouldn't look at if we got the divorce degree.  Our job is to determine if the DRO is a QDRO.  We are not domestic relationship lawyer and we have no interest in getting between to spouses in the process of ending their marriage. 

 

[Peter Gulia]

BenefitsLink neighbors, what do you think about this:

I have sometimes considered whether a plan administrator’s domestic-relations-order procedure might include these points:

If a submission includes any document beyond the court order someone asks the administrator to recognize as a QDRO, return those documents to the submitter. Do that with a letter to both litigants and each’s representative (if any) stating that the other documents were not read, and are ignored.

If the court order someone asks the administrator to recognize as a QDRO “incorporates by reference” a divorce decree, settlement agreement, or other document, state the administrator’s finding that the order is not a QDRO because the order does not “clearly specify” its instruction to the plan’s administrator.

Is this a good idea, or a bad idea? Why? What are the potential disadvantages?