QDRO’S and Plan Administrators:
A Practitioner’s Guide

Too often the QDRO qualification process is delayed or made more complex as a result of the inappropriate intervention of a Plan Administrator (“PA”). Family lawyers are skilled in family law; there is no mandate that he/she also be expert in the nuances of ERISA and the Retirement Equity Act. Unfortunately, this absence of full familiarity with federal pension law encourages PAs 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 needless exchanges which are costly and time consuming. The purpose of this Practice Aid is to alert the practitioner to the limited latitude accorded to PAs by ERISA, and to offer suggestions as to how to deal with PAs who exceed the scope of their functions as prescribed by ERISA and the Retirement Equity Act .

The role of the Pension PA as it relates to the QDRO qualification process is limited and non-discretionary. However, over time this role has expanded due to the reluctance of family lawyers to challenge PA excesses. The specific duties of the PA are defined and limited by statutory language at 29 USC 1056(d)(3)(C)&(D). If you clearly recognize each of the below indicated components of this citation you will have incorporated into your Property Settlement Agreement/Judgment of Divorce all that is necessary to comply with the Domestic Relations Order Qualification guidelines enacted pursuant to the Retirement Equity Act. Troyan, Inc. suggests use of these parameters as a guide. The following is taken directly from the statute cited above:

Compliance Guide:

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

1. 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,
2. 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.
3. the number of payments or period to which such order applies, and
4. each plan to which such order applies.

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

1. does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan,
2. does not require the plan to provide increased benefits (determined on the basis of actuarial value), and
3. 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 foundation phase of the DRO qualification process. From this foundation you will delineate the division and distribution of the marital/community property components of each Retirement Plan in a manner that is consistent with applicable state law. It is emphasized that intervention into this division of marital/community property is beyond the reach of a PA provided you did not insert provisions contrary to the above guide. If your division and allocation of marital/community property is consistent with state law and fully recognizes the constraints imposed under 29 USC 1056(d)(3)(C)&(D) your Order will be qualified. A PA is not empowered by statute or otherwise to intrude or comment upon the terms and provisions of a DRO, unless an attorney has inadvertently inserted language or a procedure that is contrary to the “Compliance Guide”.

Be clear, the PA may not read, comment upon or indicate in any manner that your Order is at variance with the divorce decree. A PA, has not been given the right under the Retirement Equity Act to examine your decree. Moreover, the PA has no right to even see this document. Note this is true for ERISA Plans. This is not the case for Federal and Military divorces. The sole function of the PA is to determine if your submitted Domestic Relations Order is in compliance the statute.

If your DRO is challenged or rejected by a PA, he or she must clearly specify which portion of your Order is contrary to federal law (one or more of the above 7- Guidelines). Additionally, the PA must specify which section of the statute was in its opinion contravened, abrogated or violated. Remember, most challenges to your Order will come from a non-lawyer, often a clerk with a checklist.

REMINDER: In many cases a PA looks behind the face of the Order to determine whether it is in fact a qualified Order. Such action is beyond the scope of a PAs statutory authority. Nevertheless, having prepared in excess of 12,000 Domestic Relations Order’s we have found PA intervention a common practice. Among the PAs intrusions are:

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

Be clear: “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. Not one of the above 4 objections are based on legal doctrine known to Troyan, Inc.. Unless challenged promptly on the basis that the PA has exceeded the scope of its 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 PA regarding any area reserved to the state family court. Make a demand that the PA provide specific citations indicating that the alleged non-compliance is at variance with the applicable law. If the objection is not based on the “Compliance Guide”, the probability is great that the PA has exceeded the scope of its authority. As noted above DRO 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.

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