We (TPA) have been asked to comment on a request to honor a distribution form being signed by a court appointed 'commissioner' acting as the participant. The participant is a terminated employee of our client. The court has appointed a commissioner under "Rule 70". Our state has adopted the same language as in the Federal Rule 70. The plan document does not address this specifically in definitions or elsewhere. Counsel will be contacted, of course, but I am interested if there is any experience to be shared here.

what court, state or federal.

Would question validity of a state court appointment. Seems to easy a mechanism to avoid the anti assignment rule of ERISA.

MA state, but again the Commonwealth adopted the wording of the federal statute. It seems a lot of work for someone to go through to get around non-alienation, but I appreciate your caution. I was hoping some viewer would have trod this path before. We can't be the first to deal with this odd event, I hope. Thanks for the reply.

you could be, remember MA is the only state to direct same sex marriage by court decree.

It would be my gut to remove the order to federal court as an ERISA matter and have the Federal Court determine if it is "valid".

Without knowing an amount, it may have been worthwhile for a creditor to attempt to force payment.

If you violate the anti assignment rule, you may be jeopardizing the qualification of the retirement plan and exposing the plan sponsor to greater liability from all of the participants.

What is the basis for appointing a commissoner under rule 70? Is it to represent the participant's interest, e,g is part incapacitated or is it because the part. refuses to do something such as elect to receive a distribution from the plan?

mbozek

here is the rule; it appears to be the appointment when a creditor does not do something


RULE 70. JUDGMENT FOR SPECIFIC ACTS: VESTING TITLE

If a judgment directs a party to execute a conveyance of land or to deliver deeds or other documents or to perform any other specific act and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done has like effect as if done by the party. On application of the party entitled to performance, the clerk shall issue a writ of attachment against the property of the disobedient party to compel obedience to the judgment. The court may also in proper cases adjudge the party in contempt. If real or personal property is within the Commonwealth, the court in lieu of directing a conveyance thereof may enter a judgment divesting the title of any party and vesting it in others and such judgment has the effect of a conveyance executed in due form of law. When any order or judgment is for the delivery of possession, the party in whose favor it is entered is entitled to a writ of execution upon application to the clerk.

IMHO, this rule and the commissioner's appointment appears to violate the anti assignment provisions of ERISA - as opposed to the appointment of a guardian or the grant of a power of attorney.

There are three cases on ct orders to seize benefits:

US v.Jackson 229 F3d 1223 Fed ct cannot order that ERISA retirement benefits be used to make immediate payment of restitution as part of criminal's sentence

US v. Smith 47 F3d 681, retirement funds cannot be seized after distribution in order to comply with restitution order because it would violate nonalienation rules.

Guidry v. Sheetmetal Workers Pension fund, 493 US 365, ERISA prohibits imposition of a constructive trust on participant's retirement benefits to recover judgment against participant.

If a court cannot order a constructive trust placed on a retiree's benefits to recover a judgment I dont see how a court order that the payment be made to a person designated by the court is valid because this is the equivalent action.

Thanks for the information. It seems clear that invoking Rule 70 won't be enough to avoid non-alienation. The cites were helpful, mbozek. Just for background the former participant is not cooperating in a domestic relations issue. There may well be good reason to force the payments, but we'll suggest the Trustees tell atty's to try the QDRO route. As b2kates cautions, we are in MA. Funny Commonwealth.

A non-cooperative participant is a problem for the plaintiff's attorney and the judge to consider. However, the plan should not accept a QDRO that was not agreed by the participant. My advice is to have your ERISA attorney state the plan's position clearly to the court.

SoCalActuary-

I completely disagree with your statement. A domestic relations order is a domestic relations order. Where in the applicable law does it say that the participant has to agree to it before the order can be determined to be qualified? Courts order a lot of things that the litigants don't all agree with. That is one of the main purposes of courts.

I agree with QDROphile, a domestic relations court can issue a vailid QDRO without the consent of one of the parties, in an contested divorce.

Your position is that a domestic relations court can take a participant's benefits under a DRO without the participant's consent. I am not a lawyer, but that looks like an assignment of benefits to me.

Maybe someone can explain why the participant does not consent. Is it just a case of cussed stubbornness, or are there substantial issues? Has the participant's counsel explained to the court why approval has not been given?

Does the court have some reason to impose a sanction on the participant for failure to respond?

I think that's why they use the term qualified to describe the DRO.

Read IRC 414(p).

Nowhere does it mention that either party must consent to the court-filed Domestic Relations Order.

One example: I don't think that the person who falls way behind on child support payments should have a veto power over the court doing the right thing [as authorized by the IRC and ERISA] and issuing a QDRO for the benefit of the children.

Likewise, should a recalcitrant ex-spouse stop their ex from receiving what a court of law says is rightfully theirs?

414(p) is one the very few exceptions to the "Anti-Alienation" protections of plan assets.

Thanks for the further clarifying comments. The original post did not start with a QDRO as the reason for the Rule 70 court appointment.

I agree that the court can take the action within the context of the DRO, but the plan needs some protection against a later claim by the participant.

I also worry that an action under Rule 70 would please bankruptcy judges who don't want to respect the ERISA alienation rules, so I would want assurances that the proposed QDRO is a legitimate family law matter.

Retirement benefits are not subject to alienation under bkcy law and turnover under rule 70 is a violation of the nonalienation rules under Guidry and Jackson cases. State divorce ct can order turn over of retirement benefits under a DRO without part.consent if permitted under st divorce ct but not under rule 70.