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QDRO's – COMPLIANCE GUIDE

PLAN ADMINISTRATOR'S LIMITED AUTHORITY

Too often the Qualified Domestic Relations Order (QDRO) qualification process is delayed or made more complex as a result of the uninvited intervention of the Plan's Administrator. Family lawyers are skilled in family law; yet, there is no mandate that she or he also be expert in the nuances of ERISA, The Retirement Equity Act and the Code of Federal Regulations.

Frequently, this absence of familiarity with federal pension law encourages Plan Administrators to exceed the scope of their federally delegated authority when they determine the status of a Domestic Relations Order ("DRO"). Unless challenged by the informed family lawyer this intrusion into the divorce process mires the parties in time consuming, needless exchanges which increase costs. The intent of this newsletter is to alert practitioners to the limited scope of authority accorded to Plan Administrators by ERISA, and to offer suggestions as to how to deal with Plan Administrators who exceed the scope of their authority as prescribed by ERISA and the Retirement Equity Act.

The role of the Pension Plan's Administrator as it relates to the QDRO qualification process is limited and non-discretionary. Over time Plan Administrators have inflated their role due to the reluctance of family lawyers to challenge these infringements. The specific duties of Plan Administrators are defined and limited by ERISA. See 29 USC 1056(d)(3)(C)&(D). It is suggested that practitioners consider each of the below indicated components of this Compliance Guide. When the items in the "Compliance Guide" are recognized in your Property Settlement Agreement or Final Judgment of Dissolution of Marriage and the draft Domestic Relations Order, your Order should meet the QDRO qualification requirements. Consider using these parameters as a guide.

Compliance Guide:

(C) A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies--

(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,

(ii) the amount or percentage of the participant's benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined.


(iii) the number of payments or period to which such order applies, and

(iv) each plan to which such order applies.

(D) A domestic relations order meets the requirements of this subparagraph only if such order--

(i) does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan,

(ii) does not require the plan to provide increased benefits (determined on the basis of actuarial value), and

(iii) does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order.

Experienced practitioners recognize that compliance with the above guide is the initial phase of the Domestic Relations Order qualification process. From this foundation the practitioner delineates the division and distribution of the marital property in a manner that is consistent with applicable state law. It is emphasized that intervention into this division of marital property is beyond the scope of the Plan's Administrator. When the attorney's division and allocation of marital property is consistent with state law and fully recognizes the constraints imposed under 29 USC 1056(d)(3)(C)&(D), her or his Order should be qualified. A Plan Administrator is not empowered by Employee Retirement Income Security Act (ERISA) to intrude or comment upon the terms and provisions of a Domestic Relations Order. This bar may be overcome should an attorney insert language or a procedure into the Domestic Relations Order that is contrary to the "Compliance Guide".

Attorney Alert.

If an attorney's Domestic Relations Order is challenged or rejected by a Plan Administrator, she or he must clearly specify which portion of your Order is contrary to federal law (one or more of the above 7- Guidelines). Additionally, she or he must specify which section of the statute was in their opinion contravened, abrogated or violated. Remember, challenges to your Order will often come from a non-lawyer, perhaps a clerk with a checklist.


Caution:

In many cases Plan Administrators look behind the content of the Order to determine whether your Order is in fact a qualified Order. Such action is beyond the scope of a Plan Administrators ERISA authority. Nevertheless, having prepared in excess of 20,000 Domestic Relations Orders we have found Plan Administrator intervention a common practice. Among the Plan Administrators intrusions are:

  1. Your Order as drafted is not fair, because it gives too much of the pension to the Alternate Payee.
  • Your Order failed to give the Alternate Payee a survivor interest.
  1. Your Order does not give the Alternate Payee the right to move her benefit to pay status at her discretion.
  • Your draft Order does not follow our standardized format.

Please Note:

"ERISA does not require, or even permit, a pension fund

to look beneath the surface of the order." See. Blue v.

UAL,160 F3d. 383 (1998). Nevertheless, such attempts to

compel revision of the terms of your settlement are

commonplace. Unless challenged promptly on the basis that

this Plan's Administrator has exceeded the scope of their

authority you may find your settlement at risk. When your

Order is challenged, determine if the basis of the objection

is some portion of USC 1056(d)(3)(C)&(D). If you believe

you have followed the "Compliance Guide", do not tolerate

intervention by the Plan Administrator into any area

reserved to a state family court. Request in writing that

the Plan Administrator provide specific citations supporting her or his view that the alleged non-compliance is at variance with ERISA. If the objection is not based on the Compliance Guide", the probability is great that this Plan Administrator has exceeded the scope of their authority. As noted above Domestic Relations Order qualification is often a clerical task. As a result your challenge and supporting citation may not be understood. At such point it is essential that you establish direct contact with counsel for the Plan.

Commentary: The property interest assigned to an

Alternate Payee is not contingent upon a QDRO, rather such

interest vests based on state property rights at the moment

a dissolution order issues from the state court. There

does not appear to be support in the QDRO provisions of ERISA

suggesting that a Former Spouse who does not have a QDRO

has no interest in the subject plan(s) until a QDRO is

obtained. Rather, 29 USC 1056(d)(3)(A) merely prevents an

Alternate Payee from enforcing her or his interest until

the QDRO is obtained.