Due to widespread court closures as a result of the coronavirus (COVID-19) pandemic, it may be difficult for participants or their attorneys to obtain a certified copy of a domestic relations order that many retirement plans require as part of the procedures for processing qualified domestic relations orders (QDROs). To address this issue, plans might consider adopting temporary procedures that allow for the continued qualification and processing of QDROs during these extraordinary circumstances without creating permanent exceptions to their normal QDRO procedures.
A QDRO is a domestic relations order that creates or recognizes the right of an individual (an alternate payee) to receive, or be assigned, all or a portion of the benefits otherwise payable to a participant under a retirement plan. Retirement plans are required to establish reasonable procedures to determine whether a domestic relations order is a QDRO. Importantly, plans (and their administrators) generally are required to follow those procedures when evaluating a domestic relations order.
Many QDRO procedures require that the parties to the order provide a certified copy of the order, with a date-stamp of the clerk of courts showing that the order has been filed with the court. This is done to help prevent fraud against the plan; a certified copy generally allows the plan administrator to presume that the order being submitted for review and approval is unaltered from the order issued by the court.
An issue arises if the parties to a domestic relations order are unable to obtain a certified copy of the order because the office of the clerk of courts is closed––as has happened in many places due to the COVID-19 pandemic. This raises the question of whether a plan administrator can qualify and process a domestic relations order without a certified copy.
A plan administrator could choose to adhere to its QDRO procedures that require a certified order. But doing so has the potential to hold up payment of benefits to participants and alternate payees for an indeterminate period. Faced with this dilemma, a plan administrator might want to consider modifications to its QDRO procedures to allow for the continued qualification of domestic relations orders during the COVID-19 crisis, or in other situations when a certified copy of a domestic relations order is not available due to court closures or other extraordinary circumstances.
Two simple alternatives include representations from the parties—the attorneys or the participant and alternate payee themselves—and an independent verification by the plan administrator. Under the party verification approach, the plan administrator could consider accepting signed representations from the parties, under penalties of perjury, that the order being submitted is a true and correct copy of the final order filed by the court, that a certified copy is unavailable, and that the circumstances make it impossible to submit the certified copy.
Under the plan administrator verification approach, the plan administrator could access the court's electronic filing system to confirm that the version of the order submitted by the parties is identical to the order filed by the court.
As part of these approaches, the plan administrator could also require that the parties submit a certified copy of the court order when it becomes available. However, this would require a process for following up with participants and alternate payees who fail to do so, which could be very burdensome for the plan administrator.
A plan administrator could adopt one, both, or a combination of these alternative procedures, or some other reasonable procedures––and in doing so should consider documenting the modifications in the plan's QDRO procedures as a means to help ensure consistent plan administration, and as a guide to participants and alternate payees on the plan's requirements for approval of an order during any period that a certified copy of the court order is unavailable.
If you have any questions concerning how to address QDROs, please reach out to your Morgan Lewis contact.