The GAO Reviews QDROs
In July 2020, the Government Accountability Office (GAO) prepared a report for the Ranking Member of the Senate Committee on Health, Education, Labor and Pensions about Qualified Domestic Relations Orders (QDROs). QDROs are court-issued orders that allow a divorced spouse (or in rare cases a child) to receive a portion of a participant’s qualified retirement plan benefit. A QDRO is one of the few ways in which a participant’s qualified retirement benefit can be assigned or alienated.
The report’s two key findings were to encourage the Department of Labor (DOL) to:
Find ways to collect data on the fees that defined contribution plans charge to participants or alternate payees for reviewing QDROs
Improve divorcing parties’ access to information about the QDRO process.
If you are a defined contribution plan sponsor, in light of the GAO’s report and recommendations it may be a good time to review the fee your plan charges for the review and processing of a QDRO (if any) to evaluate whether the fee is reasonable for the costs associated with the QDRO-qualification review. The GAO reports that typical fees for a QDRO review are between $300 and $600. Of the seven non-public large-plan sponsors that completed the GAO survey, five did not charge anything for a QDRO-qualification review and the other two charged $300 and $350, respectively. Keep in mind also that QDRO-related fees should be disclosed in the summary plan description for the plan, as well as in a plan’s participant fee disclosures.
Additionally, if your plan does not have a model QDRO document that can be provided to interested participants or potential alternate payees, you should work with your recordkeeper or legal counsel to prepare a model QDRO draft for your plan.