Rightfully Yours. Gary A. Shulman
loyalty of plan administrators toward their employees. Many plan administrators do not realize that the nonparticipant spouse is actually considered a co-owner of the pension by domestic relations courts throughout the country. However, as unresponsive as some plan administrators are toward attorneys, they may be even less responsive to a former spouse trying to obtain information directly.
These attitudes may change once the QDRO is approved, because the nonparticipant spouse should be considered by the plan administrator to have the same status as a plan beneficiary and to be entitled to all of the required notices and other information sent to plan participants. Also, an alternate payee should then be permitted to receive information from the plan regarding the amount of the assigned benefits and how much the alternate payee would receive, depending on various potential commencement dates.
2. Remaining Nonadversarial with the Plan Administrator
When Congress created the QDRO laws in 1984, it granted plan administrators sole discretionary authority in approving your QDRO. Plan administrators come in all shapes and sizes. Some are rather sophisticated and have in-house ERISA (pension) attorneys and QDRO processing departments; others have never heard of ERISA or a QDRO. Many smaller companies are not aware of the QDRO provisions of the law and may use an independent third-party administrator to handle their employee benefits matters.
Whether you are dealing with a Fortune 500 corporation like General Motors or a company like Lenny’s Collision Center, both you and your attorney should treat the plan administrator in a kid-glove, nonadversarial manner. While this is next to impossible for many divorce attorneys, it is essential that you not antagonize the plan administrator when you submit a QDRO for review. It’s a lose-lose situation if you do. As the outsourcing QDRO review agent for many Fortune 500 companies, I have received countless correspondences from attorneys that are submitting QDROs for review. Sometimes the cover letter to the QDRO will go something like this: “If you do not review this QDRO and make payment to my client within ten days of receipt, you will be held personally liable and I will make you a party to the case and start litigation immediately.” This is not a good first impression to make on the plan administrator.
Even though your QDRO may be deficient from a strict legal perspective, a plan administrator may decide to go ahead and approve your QDRO by applying a liberal interpretation of it. The administrator may decide to make an assumption regarding a silent provision just to help the parties finalize the QDRO quickly. If you catch the plan administrator in a good mood, it may forgive some technical and nonsubstantive QDRO deficiencies that could otherwise result in a rejected order. For example, assume the QDRO awarded you $20,000 from your ex-husband’s 401(k) plan but does not include language about where the $20,000 is to come from among your ex-husband’s six investment accounts. If the company wanted to, it could reject your QDRO because the QDRO was silent on the issue of the allocation of your share of the benefits. It may say, “Sorry, your QDRO is rejected because it didn’t tell us whether we should take the whole $20,000 from one of his accounts under the plan or on a pro rata basis from among all of his accounts.” As ridiculous as this sounds, many companies reject QDROs everyday for this very reason.
If this is the only apparent problem with the QDRO, the plan administrator may assume that it was your intent to make a pro rata allocation, and approve the QDRO accordingly. However, if you or your attorney antagonize the plan administrator in some fashion, it would be well within its rights to reject your QDRO and require you to submit an amended order clarifying the method of allocation of benefits. This is just one of many examples of the importance of aligning yourself with the plan administrator rather than making an enemy of it. Not only could it apply stricter requirements when reviewing your QDRO, but it could also delay the review process for months or, in some cases, years.
Plan administrators who act in a clearly partisan fashion sometimes seem almost shocked and amused by the aggressive behavior of divorce attorneys. Sometimes administrators are downright hostile, and rude to boot. If they have suffered through incendiary phone calls from your attorney, requests to complete 40-page interrogatories, incessant letters demanding immediate responses, subpoenas, and hours spent in a witness waiting room, this may have fueled some of their hostility. Some plan administrators have received orders (purporting to be QDROs) that simply demanded a check for the alternate payee. Other plan administrators believe it is not their responsibility to school attorneys on drafting QDROs. Whatever the reason, you and your attorney need to exercise caution when dealing with plan administrators.
In some ways, plan administrators are similar to expert witnesses in court. They often answer you or your attorney’s questions precisely, without providing additional information. For example, if you ask them to identify “all of the pension plans” under which your ex-husband is covered, they may say that he is covered under just one pension plan. What they may fail to tell you is that your ex-husband is also covered under the company 401(k) and the employee stock ownership plan (ESOP), which are technically not “pension plans.” If you learn to ask plan administrators questions they can readily answer (avoid 40-page interrogatories) and never order them to do anything, the entire discovery and QDRO process can be sped up.
If the plan administrator takes a dislike to your attorney’s efforts to qualify the QDRO, only you will be the loser. Plan administrators have a fiduciary obligation to review your QDRO in a prudent and timely manner, but they can and do let them sit for many, many months. Worse, if the QDRO is deemed deficient in some way, they are not obligated to tell you or your attorney what the deficiencies are. They may send you a one-sentence letter stating that the QDRO does not qualify and to please try again.
The importance of exercising good behavior in dealing with the plan administrator cannot be overemphasized. Your attorney’s hardball tactics — useful and sometimes necessary in the courtroom — will fail when dealing with the plan administrator’s review of a QDRO.
When you do confront plan administrators who are apathetic, overpaternalistic, or very adversarial, learn to bite your lip and keep your cool. Unfortunately, Congress, in its infinite wisdom, gave plan administrators nearly total discretionary authority over employee benefit matters relating to the domestic relations arena. The federal pension law known as ERISA, however, does provide participants and beneficiaries with certain rights regarding their benefits and information about them. But think of ERISA litigation only as your last resort.
3. Problems in Discovery
Providing the plan administrator with a reasonable amount of time to reply to your (or your attorney’s) written requests for information and to review your QDRO will help with your relationship. Your attorney should be very cautious with his or her discovery approach. His or her requests for information may frequently be construed in a way that gives an unfair advantage to your ex-husband. Plan administrators have an uncanny ability to mold their answers to fit your questions. In other words, it’s not what they say that can hurt you, it’s what they don’t say. Here are a series of examples that should aid you in understanding the need to exercise due diligence in the discovery process:
• The plan administrator is requested to identify the participant’s current balance in the company savings plan. You are told that the participant has $4,000 in the plan. Unknown to you and your client, the participant took a $14,000 loan just days earlier.
• An auto worker’s plan administrator is asked to calculate the participant’s accrued benefit under the defined benefit pension plan. You and your attorney are told that he has accrued a pension of $957 a month. However, no one tells you that in one year, at age 49, he can retire at $990 a month for life, with an additional $1,050 monthly pension supplement until he reaches age 62.
• The administrator is asked to reveal all pension plans under which the participant is currently covered. Based on your attorney’s discovery letter, you are informed that he is covered under a defined benefit plan that will pay $645 a month at age 65. The company does not reveal that he has a 401(k) savings plan with a balance of $23,000. Remember, your attorney only inquired about the “pension plan” and not about the savings plan.
• The plan administrator at