PLAN ADMINISTER CHANGE DURING QDRO ATTEMPTS

Hello all, I have a scenario caused by an employer changing from T Rowe Price to Fidelity in the midst of QDRO submissions. The Stipulated Judgment of Dissolution specifies a Valuation date of 10/23/20 and my account contained only pretax contributions on that date. Fidelity won’t accept any Valuation date prior to 12/29/2023 since that’s when their record keeping started. My first Roth contribution date was 2/24/23 with TRP and then an in plan Roth conversion was completed prior to Fidelity takeover 12/29/23. All payroll contributions since 2/24/23 have been Roth. Fidelty’s QDRO guidance allows for USE of a valuation date prior to 12/29/23 but states adjustment to the award should occur utilizing TRP statement. They state the valuation date must be 12/29/23 or the QDRO won’t be qualified.
A motion to vacate the QDRO was filed in February 2024 with due diligence after the judge signed the invalid QDRO. The award was not adjusted for the valuation date Fidelity required. The motion to vacate STILL hasn’t been heard. This resulted in the AP account segregation on 3/4/24. All Roth contributions I made including the in plan Roth conversion were treated as marital property resulting in a Roth tax cost basis being assigned to my Ex when he should have NONE. Fidelity backed out all Roth from his award as of the 12/29/23 valuation date and ignored my prior non-marital Roth contributions that started 2 years post dissolution and 18 months after the 10/23/20 stipulation of Valuation date.

How would the calculation work to “adjust” his flat award amount (no gains/losses)? Does he just keep the Roth tax cost basis, which is a loss to me? Are we to calculate the income tax savings he received as a dollar amount and then subtract that from his award? Would any individual IRS amendment be necessary for either party?

Fidelity’s valuation date mess suggests the state court violate 2 stipulated orders, one stating valuation date and another stating the flat dollar amount of his award. 
I’m doubtful that Fidelity would even get involved due to the court’s extended delay.

After 5 QDRO attempts, all being incorrect, the judge has even imposed judgement interest on the total award amount and atty fee reimbursement for my objections! Wouldn’t this be an ERISA violation as well since a VALID QDRO IS REQUIRED for the award to be made? another motion to vacate was filed for that as well.

Thanks in advance for any thoughts on this matter!

This has become a serious problems for those of us you prepare QDROs. We used to rely on the in-house Plan Administrator to adjust for gains, losses and investment experience from the Valuation Date to the Date of Distribution, vel non.  But they started to outsource this task to Third Party Administers like Fidelity, MassMutual, Yoya, Vanguard, and invariably they would not have any records prior to the date that they took over as the TSA.  Now we have "Record Keepers" and the same problem. 

It is actually worse than that.  IRA custodians will not adjust from date to date.  The value to be transferred is determined on the date they make the transfer from one party to the other. Take a look at the attached Fidelity form 

Effective January 1, 2023, TIAA-CREF is doing the same thing for deferred annuities. Solution - take the AP's share from CREF accounts, not TIAA accounts. 

There are workarounds in my home state of Maryland, none official. See the attached "Valuing" Memo for a few ideas.  Averaging growth in the DOW, S&P 500, Nasdaq and Moody's from date to date is popular. 

Most useful was my own stockbroker, John Young at UBS, who relied upon the Reynolds case

https://scholar.google.com/scholar_case?case=7890958532011854972&q=reynolds+v.+reynolds+marital+property&hl=en&as_sdt=4,21

using a treasury rate/note/bill as a minimum rate of return.  See the attached analysis he did for me.  It wasn't a big case, but it showed it could be done.  The other side didn't buy it and the client decided the benefit was not worth the cost of fighting it

Let up know what happens. 

David  

Fidelity IRA Form.pdf Valuing Defined Contribution Plans.pdf Sample Case Growth Computation..pdf