Family Lawyer Magazine publisher Dan Couvrette interviews pension and QDRO expert Tim Voit on hiring a QDRO expert and reducing a family lawyer’s liability.
By Dan Couvrette, Divorce Marketing Group CEO
Dan Couvrette: What problems have you seen in settlement agreements regarding pensions and QDROs?
Tim 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 to 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 divorces around the country. 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.
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.
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 of” date, even though the offset occurred the year before date of filing – so that spouse lost out on about $30,000 in gains. 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.
This article has been condensed from the original; to read the full version, go to www.familylawyermagazine.com/articles/QDRO-interview-Voit.
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. www.vecon.com
Dan Couvrette is a marketing expert to family lawyers and divorce professionals. The CEO of Divorce Marketing Group, he is the publisher of Family Lawyer Magazine and Divorce Magazine.
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