Volume 3, Number 1
|Table of Contents|
Family Lawyer Concerns About Preparing Qualified Domestic Relations Orders
I just recently returned from speaking at a continuing legal education seminar on family law issues. My presentation focused on Qualified Domestic Relations Orders (QDROs). A “QDRO” is a court order required in order to divide certain retirement assets in a divorce proceeding pursuant to applicable federal law (namely, the Internal Revenue Code of 1986 (Code), as amended, and the Employee Retirement Income Security Act of 1974 (ERISA), as amended). As has happened on numerous occasions in the past, after either making a presentation to family lawyers or speaking with family lawyers while serving in my capacity as former in-house counsel for two large national pension funds in Washington, D.C., I received numerous comments similar to the following: “Preparing the QDRO is the part of the divorce proceeding we family lawyers dislike the most because we are concerned about the possible malpractice involved in handling this complex area of federal law.”
In light of the above, I carefully examined why divorce attorneys seem to have a disdain for QDRO-related issues. I concluded that the following may be possible causes for their consternation. In addition to understanding and handling all aspects—procedural and substantive—of the applicable state domestic relations law, an attorney handling a divorce proceeding on behalf of a client is also responsible for understanding the governing provisions of the Code and ERISA applicable to QDROs—laws with which most family lawyers are not intimately familiar. Moreover, domestic relations attorneys must obtain and understand all documents and instruments governing the particular employee benefit plan at issue. And, since each employee benefit plan contains different terms, understanding the nuances of each plan is a difficult task. Adding to the confusion is the fact that an order that was deemed perfectly acceptable by one plan administrator may be rejected by another plan administrator.
Another aspect of this area of the law with which domestic relations attorneys seem to initially struggle is the fact that it is the plan administrator, not the judge of the court having jurisdiction over the state domestic relations proceeding, who ultimately determines whether a domestic relations order is “qualified” (i.e., enforceable). This grant of authority to the plan administrator, rather than the judge, seems strange because attorneys go through law school reading cases establishing the binding authority of the court. However, most family court judges, like domestic relations attorneys, are not extensively familiar with ERISA, the Code or the particular employee benefit plan at issue. Therefore, Congress and the governmental agencies having jurisdiction over QDRO matters determined that the plan administrator, rather than the court, should have ultimate authority to determine whether a domestic relations order is, in fact, “qualified.”
In light of the above, if a domestic relations attorney simply prepares an order and submits the same to the court for entry without first obtaining approval from the plan administrator, even if such order has been entered by the court, the plan administrator can reject the order, provided the plan administrator has a reasonable basis for doing so. The family lawyer then must re-draft the order and submit such “amended” order to the plan administrator for approval and then, once approval has been obtained, re-submit the amended order to the court for entry.
Further complicating the drafting phase is the fact that each plan may have different administrative procedures (e.g., distribution rules, application procedures, payment forms, etc.) governing the operation of the plan. Although the plan’s procedural requirements may not make logical sense to a person not closely involved with the plan’s operations, most likely the plan administrator has a very good reason for requesting that certain provisions of the QDRO be drafted in a particular manner.
Notwithstanding the above, as the domestic relations attorney representing your client’s interests, you must remember that there is more than one way to draft a QDRO. Moreover, you are not obligated to follow verbatim the model QDRO provided by the plan administrator. If you do utilize the model QDRO provided by the plan administrator, you must carefully review the terms of the plan and understand all of the ramifications of using such sample QDRO language; otherwise, you may end up with an unintended result, which may disadvantage your client. Remember also that even if a QDRO is deemed acceptable by the plan administrator, if such order does not carry out the intent of the parties, as set forth in the divorce decree and/or marital property settlement agreement, as the attorney representing one of the parties, you may be subject to liability and/or a claim for malpractice.
Since retirement assets may be one of the most significant assets in the marital estate, and since a QDRO is a legal court order, it should be prepared by a licensed attorney having expertise in QDRO matters. Note that not all self-labeled “QDRO experts” are licensed attorneys. Even though you are the domestic relations attorney handling the divorce proceeding and, as such, have the ultimate responsibility for making sure that an acceptable QDRO is entered by the court, if you do not feel comfortable preparing the QDRO, engage an experienced QDRO attorney so you do not have to worry about whether you have complied with all of the nuances of this complicated federal law.
Jo Ann Petroziello Collins recently opened the Law Office of Jo Ann P. Collins in Harrisburg, Pennsylvania, a law firm dedicated to assisting family lawyers in all jurisdictions with the division of retirement assets in divorce proceedings and handling all aspects of Qualified Domestic Relations Orders. Prior to re-locating to Harrisburg, Ms. Collins worked in Washington, D.C. for over 13 years, practicing exclusively in employee benefits law. She earned her Masters of Law degree in taxation and her Certificate in Employee Benefits Law from The Georgetown University Law Center and her Juris Doctorate degree from Ohio Northern University Pettit College of Law.