Sometimes a mistake can cause a married couple to

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Sometimes a "mistake" can cause a married couple to move in different directions. This is always sad to see but a reality in our modern world. Under normal circumstances, the only person who can receive a distribution from a participant’s retirement account is the participant themselves. The one exception is if the court issues a Qualified Domestic Relations Order (QDRO) . In the event of a divorce, the former spouse may be due a portion of the participant’s retirement account balance. A portion of the retirement account can be transferred to the former spouse only with a valid court order that specifies three vital pieces of information: the parties involved, the exact amount to be paid, and the number of payments (it could be only one or sometimes a series of payments). Q: A plan fiduciary receives a letter from a divorce attorney. It is on the law firm's letterhead and it instructs 50% of a participant's account to be rolled over into their departing spouse's account in a single lump sum payment. Paperwork is included providing the former spouse's account information. What action should the fiduciary take?
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A: This is not a QDRO. The request should be returned to the law firm with instructions to provide a valid court order. The issue is not the missing dollar amount. This has been handled by the instruction for 50% of the account to be transferred. The real issue is that the QDRO must come from a judge (valid court order) proving that the matter has been legally vetted. Dealing with Compliance Issues By now, you should have some perspective that there are a whole host of regulations and rules in the world of retirement planning. The best case scenario is that the company, its fiduciaries, and its paid retirement plan consultants will institute a series of policies and procedures that will ensure regulatory compliance. Still, sometimes accidents happen. What should a company do if they happen to discover a compliance violation themselves before the regulators uncover it? The first step is always to correct the problem as soon as it is discovered. Period. The next step requires a high degree of integrity. The company should contact the regulators and inform them that the company discovered an issue which was promptly fixed. If a company elects not to inform the regulators and the issue is discovered during an audit, then significant fines could be levied. The IRS has a program called the Employee Plans Compliance Resolution System (EPCRS) . The Department of Labor also has a similar program for voluntary compliance infraction reporting. The concept is the same in both circumstances. If a company self-reports a violation that has been promptly corrected, then there is a chance that the regulators will not levy any fine whatsoever. The company will also build goodwill and a reputation with the regulators as an entity who is trying to do the right thing for its employees. If a fine is levied following a self-reported compliance infraction, then the fines are
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  • Spring '14
  • VOSS,JAMESA
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