Steve Leventhal: Pension Compliance Solutions

Q: You still alive? Here is my question ... if you’re still breathing. I represented a wife in a divorce. In the judgment of divorce she was given the entire amount in her husband’s profit-sharing plan as of the date of divorce. At the time of the entry of divorce, it was valued at $300,000.00, and with equalizing assets that was the proper amount for her to receive. One month later, I am about to send the case to you for a QDRO – who else would I send it to – and I learn that the account is valued at $250,000.00 due to the stock market going down and she is hot (not the good hot). How do I avoid this problem in the future?

A: This is an unfortunate situation that occurs in a volatile stock market. Here are several suggestions and I suspect divorce attorneys would have other ideas.

At some point in the divorce proceeding, if it becomes apparent that your client will be an Alternate Payee, you might want to have the retirement plan investments converted to fixed investments. This might require a Court Order. That way you know what your client will get and it can not get hammered by the stock market.

You might want to state clearly in the judgment of divorce that if the account balance ultimately transferred to the Alternate Payee is less than the amount agreed to in the judgment of divorce, the Court specifically retains jurisdiction to require the Plan Participant to make up the difference out of alternate resources. A Plan Administrator will not give an Alternate Payee one cent more than exists in the account balance.

The key, I believe, is to find out what the retirement plan account balance is invested in so that you can assess the risks to your client’s share of the account balance. This will provide the information for you to decide whether to (1) take steps to convert the investments to a fixed portfolio, (2) factor in gains and losses, (3) add language to the judgment of divorce requiring the Plan Participant-spouse to make up any difference.

I am always available to discuss this with attorneys before the ink is dry … even with you.

Archived Question: March 2006

Q: Here it is March 2006 already, where have you and your pithy QDRO gems been for the last two months? Here is my question. All these Orders dividing retirement plan benefits have different names. I get a migraine trying to remember them. Can you give us the names so we can glue them to our office doors?

A:
I pray that someone other than you writes in for answers.
Glue this.

QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)—for all private retirement plans, such as pension, 403(b)-plans, profit-sharing, 401(k)-plans, 457-plans (generally), and IRAs (when the plan custodian requires a QDRO).

***** QDROs are also used to obtain past due child support and past due spousal support. THIS IS A SLEEPER AND SHOULD BE USED MORE OFTEN THAN IT IS.

COURT ORDER ACCEPTABLE FOR PROCESSING (COAP)—for the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS).

MILITARY QUALIFYING COURT ORDER (MQCO)—for military retirement benefits for active and retired military regardless of branch of military service.

QUALIFYING COURT ORDER TO DIVIDE RAILROAD RETIREMENT BENEFITS (??????????)—for railroad retirement.

QUALIFYING RETIREMENT BENEFIT COURT ORDER (QRBCO)—for the federal Thrift Savings Plan.

OREGON PERS DOMESTIC RELATIONS ORDER (??????) —for Oregon PERS.

QUALIFIED MEDICAL CHILD SUPPORT ORDER (QMCSO) —to ensure that children receive appropriate health care coverage pursuant to Sec. 1169 of USC Title 29, Chapter 18, Subtitle B, Part 6 (Continuation Coverage and Additional Standards for Group Health Plans).