Читать книгу Rightfully Yours - Gary A. Shulman - Страница 50

One gray area in the administration of QDROs by a plan administrator deals with fees charged to participants or alternate payees. Many companies today still charge an alternate payee for processing a QDRO in accordance with the requirements of ERISA and Section 414(p) of the Internal Revenue Code. Some Fortune 500 companies request advance payment of $200 to $300 to accompany a QDRO before they will determine whether it qualifies.

The economics of dealing with QDROs can cause companies to increase expenditures to their attorneys, actuaries, and consultants for the review and processing of QDROs. But you might wonder whether administrative fees are fair, considering that plan administrators are required by statute to make qualifying determinations regarding QDROs. What can you do when the company’s written administrative procedures dictate that a certain amount, a “QDRO processing fee,” will automatically be deducted from their distribution? You will probably have as much success fighting city hall over a parking ticket.

Some clarification on this issue finally occurred several years ago in an official opinion letter from the Pension, Welfare and Benefits Administration (PWBA). The letter was prompted by a request from a plan administrator to permit the modification of the terms of its profit-sharing plan by allowing it to charge the account of a plan participant for any QDRO processing that affected this participant. In its opinion, the PWBA stated that an administrator of a retirement plan covered under Title 1 of ERISA may not charge an individual participant or an alternate payee any fees for processing a QDRO to determine whether it satisfies federal requirements for QDROs.

The rights of alternate payees under QDROs are guaranteed to them under ERISA and the Internal Revenue Code. To allow a plan administrator to charge for something it is required by law to provide flies in the face of equity. The PWBA did state that ERISA allows plans themselves to incur reasonable charges to cover certain costs and that plans may properly pay for reasonable administrative costs in processing QDROs. It distinguished between an alternate payee’s rights to a portion of a participant’s benefits as guaranteed by statute and an optional right that is permitted, but not required, under ERISA.

Occasionally, charges may be assessed to the participant or alternate payee. For example, a plan administrator may legitimately charge a participant for reasonable expenses incurred in exercising a plan option to allow employee-directed investments or loan processing fees for participants.

Despite the PWBA’s opinion letter, some plan administrators are still charging participants and alternate payees QDRO processing fees. For example, if your QDRO used the separate interest approach, in which your benefits are actuarially adjusted to your own life expectancy, rather than remaining based on the life expectancy of the plan participant, it appears that the administrator may properly charge the participant or alternate payee for the necessary expenses incurred for hiring an actuary to perform this calculation.

At least one plan administrator circumvented this fee prohibition by charging only to review draft QDROs (those not yet signed by the judge). Attorneys were required to pay $250 for the review of a nonexecuted QDRO. The administrator failed to inform the attorneys that the fee would be waived if they submitted a QDRO already signed by the judge.