Never, Never, Ever—Three QDRO Promises That Will Surely Land You in Hot Water With Your Client

If you represent the alternate payee, never make promises that you cannot keep, or you could end up on the wrong side of a malpractice case.

1.  Never, never, ever promise your client they will receive a “specific” dollar amount in their QDRO distribution:  

For defined benefit pension plans, your client’s share of the benefits will often include actuarial and early retirement reductions. Even in a simple 401(k) QDRO that awards $50,000, your client’s actual distribution may vary greatly, especially once investment earnings (or losses) are applied, along with the 20% federal tax withholding and a debiting of her share of any QDRO processing fees. So, if you want to avoid that imminent phone call from an irate client who tells you “But you said I would get $50,000”, never promise your client they will receive a certain sum in their QDRO distribution.

2.  Never, never, ever promise your client they will receive an “immediate” distribution once the QDRO is approved:  

This promise can be a “killer.”  The following is a true story: During the divorce proceeding, the attorney told her client that she will receive her QDRO distribution as soon as the QDRO is approved.  The QDRO awarded the alternate payee $150,000, which included an additional amount in lieu of alimony.  In essence, the alternate payee was relying on this immediate distribution and was willing to forego monthly alimony payments.  Unfortunately, the plan administrator in this case does not permit immediate QDRO distributions. They require the alternate payee to wait until the participant himself becomes eligible for a distribution, which in this case, is ten years down the road. This means that the alternate payee will not see her $150,000 for another ten years.  So, I’ll say it again. Never promise your client at any time during the divorce proceeding that she will be eligible to receive an immediate distribution upon approval of the QDRO—unless you know for certain that you are dealing with a plan administrator that permits them.

3.  Never, never ever promise your client that a “check” will magically appear in their mailbox one day:  

Virtually every plan administrator in the country requires the alternate payee to initiate her QDRO distribution once the QDRO is approved.  This means that the alternate payee will have to contact the plan administrator and request, complete and submit the necessary benefit distribution election forms.  In other words, your client’s benefits will not magically appear in her mailbox one day. Your client has to understand that she must take certain proactive steps to commence her benefits, and to contact the plan administrator if she has any questions regarding her rights and entitlements under the QDRO.

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