Over the past few years, the QDRO landscape has changed. Divorcing couples and divorce attorneys can sometimes prepare a QDRO by clicking a few boxes and auto-generate a QDRO. I briefly considered launching an online QDRO preparation system about two years ago and decided against it. After considering the merits of such a system, I concluded that online QDRO preparation is a recipe for disaster.
There are two primary types of online QDRO preparation systems — (1) online systems developed by QDRO reviewers/plan administrators and (2) online systems developed by third parties.
Online Systems Developed by QDRO Reviewers/Plan Administrators
These systems are simply fill-in-the-blank model QDROs made slightly easier by allowing you to input information through a website. Yesterday, I published an article on our website about model fill-in-the-blank QDROs and I cautioned about the dangers of using them. The article can be found here: http://bit.ly/9iu2yX .
A common misconception is that an error in a QDRO can be “fixed” later. This is often not the case after a QDRO is approved, particularly once benefits have commenced. Even in cases where “fixes” are possible, they tend to be very expensive. I cannot stress enough the importance of getting the QDRO right before it is entered with the court and approved by the plan. I participate in a listserv for QDRO preparers and many horror stories about online QDRO production have been discussed over the past few years.
In addition to the criticism I offered in my article, many of the QDRO preparation systems developed by QDRO reviewers and plan administrators are not current. Retirement plans can and do change. For example, the Fidelity QDRO preparation system was missing a critical ancillary benefit for one of the largest U.S. employers which would deny an alternate payee his or her entitlement to a stream of payments with a present value approaching $30,000. Missing such a benefit in the QDRO could conflict with state law, e.g., MCL 552.101(c)(5), and would certainly expose an attorney to a malpractice claim.
Online Systems Developed by Third Parties
Without pulling any punches, I want to directly call out QDRODesk.Com, the only third party QDRO preparation system that exists.
First, I believe their marketing materials and website are very misleading. They have a plan search feature that suggests that they custom draft for every plan in the database (which, not suprisingly, contains every ERISA plan that has filed its legally required reports with the Department of Labor). To the contrary, they have simply harvested information (or purchased the information from another source) containing data from ERISA Form 5500 filings. They do not have individual templates for each plan in the database. In fact, they may not have custom templates for any of the plans in the database. They might simply pump out generic QDROs. Frankly, I don’t know but I have seen the model QDRO they have on their website and I was thoroughly underwhelmed.
Second, for the plans where they may use “custom” templates, the criticism I offered in the above-mentioned article apply (see http://bit.ly/9iu2yX) as well as the criticism about models going stale (like Fidelity’s system did).
Third, QDRODesk.Com is an outfit out of Pennsylvania and probably misses the mark by a wide margin on state and municipal orders for other states (like EDROs) which often have unique benefit payment options. For example, some plans have “free” options that are more favorable than the “paid” options that QDRODesk.Com would draft into state and municipal orders.
Fourth, their guarantee is misleading as well. While they probably do employ people with experience who can attempt to “fix” an order later (assuming the plan doesn’t simply approve a “bad” order which harms one or both of the parties), it is often important to enter and obtain plan approval of the QDRO in a more timely manner (a future post is in the works on this topic; for now, refer to our Timing Considerations and Malpractice Traps Article).
Conclusion
Ask any family law attorneys about QDROs. They will universally tell you that they are among the trickiest of all areas of family law. An errant mouse click or a flawed production system may cost you tens of thousands of dollars that cannot be recovered.
I am an attorney with ten years of experience. I personally prepare every QDRO at QDRO Professionals PLLC. The work is not delegated to secretaries, paralegals, computer software or QDRODesk.Com. If you want to sleep comfortably at night and protect your interests, hire the professionals… QDRO Professionals.
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