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Family Lawyer Magazine publisher Dan Couvrette recently interviewed pension and QDRO expert Tim Voit and family lawyer Jordan Gerber about the role of the QDRO expert in discovery, red-flagging potential issues and time-bombs, and reducing a family lawyer’s liability.
Dan Couvrette: Does discovery always produce the information a QDRO needs to completely assess a divorcing client’s situation?
Tim Voit: More often than not, the answer is no. The most common problems are not identified (or not sufficiently identified) in the retirement plan or plans. For instance, a settlement agreement might state wife is entitled to 50% of a pension when there may be more than one pension. Another issue is whether there are survivor benefits that could be awarded; many states have case law stating that what is not awarded or mentioned in the final judgment or settlement agreement cannot be awarded in a subsequent QDRO.
Couvrette: During discovery, what should lawyers do to get the information that a QDRO expert needs?
Voit: I always suggest sending out an authorization questionnaire to each of the employers during the course of the marriage to determine exactly what pension (or pensions) each spouse has. This is especially useful in long-term marriages. All too often, the attorneys simply take the spouse’s word for what they have. A questionnaire will ask how many plans a person might be in, whether there are any frozen plans, and what other benefits might be awarded. 401(k) plans can be moved to an IRA, but pension plans typically remain with the company until retirement. So those are often left undiscovered – especially the frozen ones.
Couvrette: Is there anything a lawyer can do to help jog clients’ memories about where they and their spouses have worked during their marriage?
Gerber: It’s important to have a QDRO expert involved from the beginning of the case to help uncover that information. The expert can be drafting your discovery requests at every stage so that you get the information you need. Even if you practice exclusively family law, your wealth of knowledge probably doesn’t extend to things like frozen pension plans, so a questionnaire is definitely a good start. In a long-term marriage where people have changed jobs over the years, there could be a pension that you may never get any court order on. And once the settlement agreement has been filed with the court, you’ve lost your chance to get your client’s share of that pension.
Couvrette: Are there any other problems you see with settlement agreements regarding pensions and QDROs?
Voit: There’s a whole host of issues – from lack of providing survivor benefits in the event that the spouse with the plan predeceases the other spouse, to simply stating the spouse is entitled to 50% of the marital portion without realizing that, when it comes to 401(k)s, the plan’s not going to calculate the marital portion. The attorneys will write in the settlement agreement that the spouse is entitled 50% of the marital portion of the 401(k), and they assume that the plan’s going to calculate contributions and earnings on the marital portion. But the plan administrator really doesn’t have any means to calculate marital portions for all these divorces around the country.
Gerber: In equitable distribution states, many attorneys think that the spouse is only entitled to 50% of the marital portion of the pension when there are a lot of other benefits; if you don’t mention it, you’re doing your client a disservice because they won’t get what they’re entitled to under that blanket 50%.
Couvrette: From a lawyer’s point of view, why would you get a QDRO expert involved in the divorce process sooner rather than later?
Gerber: The expert will notice things that an attorney wouldn’t notice. Having somebody who is qualified to do this is really important – someone with a financial background and meaningful QDRO experience – so that they can red-flag the issues they see at the beginning. Unfortunately, problems with a QDRO aren’t always noticed by the client immediately. It could be years until their spouse retires, and they can’t come back 15 years later saying that their QDRO wasn’t drafted properly or that they didn’t get what they really deserved. So having somebody on your side that can get as much information as possible at the outset is imperative if you want to do the right thing on behalf of your client.
Voit: A settlement agreement might state that a spouse is entitled to 50% of pension and survivor benefits without realizing that the plan will not recognize former spouses as beneficiaries. With government, municipal plans, or even the state plans, an attorney doesn’t want a client to come back into their office ten years from now saying “What happened to my money?!” Neither the attorney nor the client knew that when that ex-spouse with the pension dies, that money’s gone: it’s forfeited to the plan or paid to somebody else. You need to look into these kinds of issues – or talk to someone knowledgeable with QDROs or retirement plan administration to get all the facts – before signing off on a settlement agreement, because the court cannot order a plan to do anything that the plan doesn’t otherwise provide.
Couvrette: Have you seen cases where a lawyer ended up being liable for a bad QDRO?
Voit: That’s happened quite a bit. In one particular case, the wife was only supposed to get $124,000, but she ended up getting $255,000 because the attorney who was retained to draft the QDRO put in the wrong cut-off date. The husband’s attorney ended up having to retain us to fix the QDRO to reverse the transaction. Just because one attorney hires another attorney to do some of the work doesn’t mean the first attorney is off the hook in terms of liability.
Gerber: Tim is talking about a family law attorney retaining another attorney who claims to specialize in drafting QDROs.
Couvrette: So reduced liability is one of the reasons to work with a true QDRO expert; are there any other reasons we haven’t mentioned yet?
Gerber: In Florida, certain individuals market themselves as QDRO experts when they’re really just family law attorneys. Most family attorneys farm out QDROs because we aren’t necessarily the most mathematically-skilled group of professionals: we don’t really understand the mechanics and the math involved in dividing pension plans. And it’s important to have somebody with Tim’s experience and can just take a look at this record going in and cleaning up the messes of these other experts down here that are claiming to have some sort of QDRO designation or be specialized in the area of QDROs. As a family law attorney, when another attorney says that they specialize in the area of QDROs, we tend to take their word for it because every state bar closely monitors how and whether you can represent yourself as a specialist or an expert in a certain area of law. You think that you’re doing your client and yourself a favour by retaining a professional – not only from a perspective of liability but from a perspective of safeguarding your client’s interests – when in actuality the person might not even have a financial background. It’s really important to not just blindly choose somebody who says they specialize in the area of QDROs but to actually sit down and look at their qualifications and experience.
Couvrette: What should family lawyers be looking for when choosing a QDRO expert?
Voit: Years of experience and educational background are key. There are quite a few professionals who don’t have an undergraduate degree in finance or actuarial science – or even math, for that matter. And that’s important because you need to be able to look at a paragraph – whether it’s a settlement agreement or the QDRO itself – and be able to quantify what the spouse is going to get. I had a recent case where they offset the values of two retirement accounts for the husband and wife, and they came up with an equalization payment. They put a flat dollar amount in the settlement agreement – they didn’t put it as a date, even though the offset occurred the year before date of filing – so that spouse lost out on about $30,000 in gains because that settlement agreement just specified a dollar amount. Because they didn’t put an “as of” date, we couldn’t put in plus gains, or language like that, in the QDRO. Understanding the logistics of the plan, and how they carve up these accounts or pension benefits, is important. An expert with years of experience will be familiar with all these plans: how they interpret the QDROs, and what they’re looking for. Each plan has preferences regarding what they want to see in the QDRO – and what might mean one thing in one plan might mean something else to another plan.
Couvrette: So you have lawyer QDRO experts and non-lawyer QDRO experts. Do both of these groups keep up-to-date with the case law that would affect QDRO and pension evaluations?
Voit: Some experts are familiar with case law and some are not. I think it’s imperative that they’re up on case law because if they use a boiler-plate QDRO for a company that’s located in another state – a state other then where the divorce is occurring – it may not apply for the state where the divorce is occurring. I find that there are some attorneys that are not up on the case law involving pensions, and understandably so because they have a lot of other issues to contend with in a divorce. One of the reasons why a lawyer retains a company like ours is because we get involved in consulting or actually writing appellant court briefs when it comes to issues involving pensions, QDROs or retirement accounts, or evaluation.
Gerber: The realm of family law is constantly changing and evolving. For a family law attorney to stay up-to-date on the case law of things that they’re intimately familiar with is sometimes a difficult feat – so staying up-to-date and actually comprehending the case law coming out about QDROs is a very daunting task, which can be impossible to do. A family law attorney should look for a QDRO expert with a financial background as well as experience.
Voit: Sometimes, the opposing attorney will cite case law that really doesn’t apply, or applies under a different set of circumstances. In a recent trial, I had to do a cost of living adjustment and other benefits; opposing counsel cited a few cases, and I replied: “Those are post-judgment cases, those are after the fact, and this is not one of those cases.” If the expert preparing the QDROs is familiar with case law, they’ll know whether the case law being cited does or does not apply to the circumstances or your case.
Tim Voit is a financial analyst and the president of Voit Econometrics Group. He concentrates on QDROs and QDRO distribution, evaluation of retirement plans, and securities litigation. He has been admitted as an expert in both state and federal courts and is often called upon in legal malpractice suits to fix QDROs or to compute or minimize damages for insurance carriers. www.vecon.com
Jordan Gerber practices exclusively in the area of matrimonial and family law in Florida. She navigates the divide between voracious advocate and compassionate counselor, and her firm is founded on the principles of mutual respect and empowering clients. www.gerberfamilylawfirm.com