Rightfully Yours. Gary A. Shulman
effectively try to dictate the terms of a settlement agreement and QDRO by forcing you to use their model language. They may refuse to even look at your QDRO unless it is based entirely on their fill-in-the-blank model language. Not only can this be dangerous, it is clearly an abuse of discretion on the part of plan administrators. The federal pension law, ERISA, does not give them the authority to dictate the terms of a QDRO. They must honor the provisions of a domestic relations order that satisfies the requirements for QDROs as they are set forth under ERISA and the Internal Revenue Code. In this situation, your attorney may have to pursue other avenues, ranging from contacting a director or vice president of the company to initiating an ERISA lawsuit for breach of fiduciary duty. The last approach is expensive and time-consuming.
On some issues, you should not bend. For example, assume that you were awarded 50 percent of the marital portion of your ex-husband’s accrued benefit as of his date of retirement (using the traditional coverture approach, as discussed in Chapter 7). But many model QDROs prepared by companies permit you only to state your share of the benefit in the form of a fixed-dollar amount or as a percentage of his accrued benefit frozen as of the date of divorce. Remember that under a defined benefit pension plan, it may not be considered equitable to freeze your share of the benefits at divorce. Only the coverture approach will provide you with inflationary protection on your share of the benefits. If you simply fill in the company’s own model QDRO with a fixed-dollar or percentage amount, it will freeze your share of the benefits. Your attorney may have to be assertive with the plan administrator on this issue by requesting, in writing, an explanation of why your language appears to violate ERISA regarding the provision of benefits to an alternate payee under a QDRO. He or she should also, if applicable, let the administrator know that under your state’s well-settled case law, the coverture approach is the recommended approach for dividing benefits under a defined benefit pension plan.
On other issues, you may have to bite the bullet. For example, some plan administrators will not permit the alternate payee to receive her share of the benefits on an actuarially adjusted basis over her own life expectancy. In other words, they do not accept separate interest QDROs. Although the separate interest approach may benefit you, the administrator will probably not budge on this issue. However, be sure to include postretirement survivorship coverage in this case to assure you of a lifetime of benefits.
8. The Administrator’s Approval and Signature
Many attorneys include signature lines at the end of the QDRO so that the plan administrator can approve and sign off on the order. If you want to expedite the approval process, eliminate this signature line. Generally, plan administrators will not sign a QDRO because they are not required to do so under ERISA or the Internal Revenue Code. Many plan administrators will deny a QDRO simply on this basis. They are required to abide by the terms of the QDRO and must furnish a written response indicating the qualified status of the QDRO. This response should sufficiently verify the QDRO’s qualified status.
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