Determination of Shared Interest for Prospective DRO in DB Plan Based on Marital Settlement Agreement

[rocknrolls2]

A married couple divorces. They reoch a marital settlement agreement  providing for the entry of a shared interest QDRO under a defined benefit plan. Based solely upon the terms of the settlement agreement, the plan's administrator proposes to implement a deternination of the shared interests of the parties, which is driven by the fact that the partidcipant is about to retire. May the plan's administrator appropriately determine the separate interests of the parties prior to the court's entry of the DRO and the plan administrator's determination that such order is qualified?

[QDROphile]

What do you mean by “determine”? The PA might be able to give a very accurate estimate. The plan can’t determine anything except on the basis of a DRO. Is the settlement agreement the DRO? The plan can advise if the order appears to satisfy the formal requirements for qualification.

[rocknrolls2]

For this purpose, "determine" is synonymous with "calculate.' No DRO has, as yet, been presented. Perhaps that could justify the triggering of the 18-month period to at least wall off the portion of the benefit that would not be payable to theparticpant pending the presentation of the DRO. Otherwise, the plan would commence payment of the participant's full benefit payment notwithstanding the presentation of the DRO after payments commenced. 

[Peter Gulia]

The pension plan’s administrator might re-read carefully and thoughtfully consider the administrator’s procedure about domestic-relations orders.

Some administrators are “strict constructionists” and do little or nothing until the administrator has received a court’s order.

Other administrators provide some help to a domestic-relations litigant’s lawyer before a court makes an order.

(I would not suggest that help unless the plan’s risks of harm from inept domestic-relations practice outweigh the risks from helping, and the administrator gets a deeply knowledgeable lawyer to design the procedure.)

A prudent administrator usually prefers to follow its domestic-relations-order procedure and its claims procedure.

If a procedure needs a redesign, do it before handling a particular situation.

This is not advice to anyone.

[fmsinc]

You began by saying this was to be a shared interest allocation of benefits.  You then ask about determining a separate interest.  And NOBODY noticed?   

Just to be clear with respect to shared......

The alternate payee's portion of the participant's defined benefit plan cannot be determining until the participant retires.   The formula for a shared interest is, for example:  

"The alternate payee shall be entitled to receive as her share of the participant's retirement annuity benefit, an amount computed by taking fifty percent (50%) of the unreduced* amount of each monthly payment, if, as and when payable to the participant, multiplied by a fraction, the numerator of which is the number of months during the marriage of the parties that the participant accrued creditable service toward retirement, and the denominator of which is  the total number of months of creditable service accrued by the participant at the time of the participant's entry into pay status."

*by the actuarial reduction in the retirement annuity required to fund survivor annuity benefits for the alternate payee

Computing the alternate payee's share prior to the time set forth above may be interesting, but has no practical use. 

The parties normally have the power to AGREE to change from and shared to a separate interest allocation, especially when the parties or their attorneys for the trial court have failed  to properly articulate the proper formula for a shared interest allocation.  

Note that I did not mention pre- and post-retirement survivor annuity benefits except at * above.  Separate interest allocations don't have survivor annuity benefits.  

If the Plan Administrator ("PA") has "actual notice" of the pendency of a QDRO and acts contrary to that information, then the PA has breached his/her/its  fiduciary duty to both the participant and the alternate payee.  Refer them to me and I will be happy to sue in U.S. District Court for  damages and my legal fees and expert witness fees.

Attached is a Memo re: shared v. separate. Shared v. Separate - 12-31-2024.pdf  

David

 

[QDROphile]

One can appear as a lawyer for a party and be an expert witness in the same proceeding? I am reminded of how certain New York law firm associates bill more than 24 hours in a day, and not by employing the trick of traveling west across time zones to expand the actual number of hours in a “day”, but that sort of double billing is not the same thing.

With respect to “actual notice” and “pendancy” of a domestic relations order that might grow up to be a QDRO, I thought that Peter Gulia asked, not too long ago, for any examples of judicial decisions relating to actions taken by plans, or failures to act, based only on notice that a DRO was forthcoming, with no DRO yet submitted to the plan (a DRO is what the statutory language requires to activate the plan)). I recall that a plan can get in trouble for acting, or refusing to act in accordance with usual plan procedures, based on notice (which is a juicy topic in itself) that a DRO was expected (someday?). I recall that no example was given of a plan simply continuing to act, or not act, in accordance with usual plan terms procedures in absence of a DRO based on some other notice that a DRO was expected. You have shared a wealth of citations for various propositions in your posts. Do you have a citation in support of the proposition that a plan that does not provide otherwise in its written QDRO procedures will continue to administer in accordance with its usual terms and procedures unless and until receipt of a domestic relations order? I am aware that the Department of Labor asserts in its QDRO book, among other erroneous interpretations, that some unspecified notice of expectation of a DRO imposes some duty on the plan not to take action contrary to the unspecified interest of a supposed would-be alternate payee, presumably, even when that would compromise the express rights of a participant under the term terms of the plan?

If no example can be found, it may be because no administrator/fiduciary would be so bold as to simply proceed without communication to the relevant known persons and establishment of reasonable conditions and times for conforming to applicable standards. That leaves us without measure of where the lines of breach of fiduciary duty are drawn. Fortuna Favet Fortibus.

[Peter Gulia]

QDROphile, I’m unaware of any Federal court decision that imposed a liability on an ERISA-governed plan’s administrator because—even assuming the administrator’s actual receipt of a notice that a could-be alternate payee intends to soon submit a domestic-relations order—the administrator did not impose a segregation or “hold” regarding the participant’s benefit.

I have not researched States’ courts’ decisions because I presume an ERISA-governed plan’s administrator will have done everything it can to:

maintain ERISA’s supersedure;

specify in its engagement of every lawyer that the lawyer has no authority to accept service of process;

specify in its engagement of any service provider that the service provider has no authority to accept service of process, even if the service provider is engaged to provide a QDRO-review service;

limit carefully which persons are authorized to accept service of process on the administrator, and write the summary plan description, QDRO procedure, claims procedure, and anything else to explain in plain language who may and who cannot accept service of process;

assert a State court’s lack of jurisdiction, including at least a lack of subject matter jurisdiction;

remove claims against the plan or its administrator to the Federal court; and

apply the plan’s exclusive-forum provision.

Likewise, an ERISA-governed plan’s directed trustee would assert those procedural protections and that the trustee lacks authority to decide a distribution.

But that a plan’s administrator might be ERISA-protected in doing nothing until a domestic-relations order is submitted is only one of many factors I consider if I advise an ERISA-governed plan’s administrator.

Different interests might matter regarding a governmental plan, or regarding a church plan that has not elected to be ERISA-governed.

[fmsinc]

10 hours ago, QDROphile said:

One can appear as a lawyer for a party and be an expert witness in the same proceeding?

Expert with respect to what?  The applicable law?   Construction of a nuclear submarine?  Diagnosis of PTSD?  

It matters. 

[QDROphile]

On 8/3/2026 at 7:19 AM, fmsinc said:

Refer them to me and I will be happy to sue in U.S. District Court for  damages and my legal fees and expert witness fees.

I now infer that “my” modifies only “legal fees” and not “expert witness fees”

I started from a mathematical perspective: a(b+c)=ab+ac