How to Limit QDRO Liability with the PAC Shield
No QDRO-drafting service in the country offers the 28-year experience or dual actuarial-legal expertise of Pension Analysis Consultants (PAC).
PAC’s unique dual Actuarial-Legal Expertise and how it reduces Your Exposure
Thoughtful family law practitioners understand what’s at stake in getting a QDRO right for a client. Getting it “right” can be the difference in tens of thousands of dollars or securing survivorship for your client. The difference between happy and angry clients. Experienced lawyers understand QDRO drafting requires retirement plan expertise quite distinct from family law practice. Because of the high stakes and complexity involved, many family law attorney seek QDRO advice from pension experts like actuaries and ERISA attorneys to reduce and/or share potential liability.
They also understand that the experts they retain must be readily available to provide drafting support and be battle-tested courtroom experts who can prevail when litigation becomes necessary. New Jersey lawyers have found the answer to their QDRO problems: Pension Analysis Consultants (PAC®).
PAC’s Treatise: the Value of Pensions in Divorce (Wolters Kluwer)
No other treatise combines the knowledge of both actuaries and attorneys. Actuary Mark Altschuler and attorney Nora Kelley have authored the most recognized legal text in the field of dividing retirement benefits in divorce. This, the 5th edition of Value of Pensions in Divorce, includes detailed explanations on ERISA QDROs, Federal COAPs, Military Court Orders and state and local plans, such as TPAF and PERS.
Zero claims in 28 years
Consider PAC’s sterling record. In performing over 20,000 pension valuations and drafting more than 10,000 QDROs over 28 years, Pension Analysis Consultants has never had a claim against its $1 million liability policy.
Where QDRO liability arises
Family law attorneys create QDRO liability in two basic ways. The first comes from drafting and/or agreeing to a Property Settlement Agreement (PSA) that fails to protect the property interests of her or his client; i.e. not obtaining a coverture QDRO for a defined benefit plan. The second comes from drafting a QDRO memorializing that failure or from drafting a QDRO that fails to secure the property rights agreed to in the PSA. Clearly, the quality of the advice the family law attorney obtains at both phases is part of shielding her or him from future questions on the quality of representation. Assessing the quality of that advice is not simple. It involves assessing experience, knowledge and credentials. Several accreditations, for example, do stand out in the pension field: actuaries with credentials and ERISAattorneys. Superficially, it is fair to say actuaries focus on the mathematics of designing and maintaining sound pension plans while ERISA-attorneys focus on the myriad rules regarding retirement plans. But that is far too simplistic; both experts typically have a robust understanding of the work of the other professional in the pension field.
Why using an attorney to draft QDROs does not inherently limit exposure and may increase it
Advising family law attorneys to limit their liability by using another attorney to advise on the PSA and QDRO fails to address the key factor: real expertise. Whether a family lawyer uses an actuary, lawyer, CPA or a benefits expert is not the issue. The issue is the quality of their work, backed by the credentials to do that work.
The dual actuarial and legal expertise of PAC shields you. We understand the “guts” of even the most complex plans. Failure to understand the technical details of a plan are the most common career-tripping problems occuring at the QDRO-drafting phase. And that is what distinguishes PAC from those who merely use common models thinking “one size fits all,” or who insist that use of an attorney drafter protects the family law attorney. They, most assuredly, do not.
Hiring the drafting-attorney as co-counsel does not eliminate your liability, if there is an error in the PSA or QDRO. Thus, there is questionable upside value and much larger downside danger if the attorney QDRO-drafter is co-counsel. In addition, if there is a dispute, co-counsel cannot testify. The family law attorney may find herself looking for a professional third party and not another family lawyer to protect their client ̶ exactly where the family law attorney should have started.
Specific examples of errors made by an attorney QDRO drafter
Here are two examples: While an attorney QDRO drafter may possibly have the required expertise, use of an attorney drafter does not guarantee liability protection, since the most important protection is the quality of the draft QDRO. For example, PAC has had to review the work of a law firm that drafts QDROs. In two cases, they were unable to complete the orders, one being a Federal COAP and the other a local township DRO. We were retained to complete the orders and obtain plan approval. In two other cases, they made errors reducing the Alternate Payee’s benefit, when they were retained by the Alternate Payee’s lawyer, thus creating a liability exposure. These errors have occurred in a fairly short time frame.
How PAC can eliminate your Exposure
Recognize where the errors came from. Both were due to a lack of understanding of how benefits are calculated ̶ PAC’s area of expertise. One demonstrates how special actuarial problems can arise in QDROs, such as a QDRO in pay status where the Alternate Payee is owed several years of make-up payments, and the plan will not accept a bi-level QDRO with extra payments being made over only a certain number of months. PAC can perform an actuarial analysis and create a level payment QDRO with the same actuarial value as the bi-level QDRO, which is a problem someone unskilled in actuarial science cannot solve.
To minimize your exposure and maximize the effectiveness of the QDRO, be sure to make use of our actuarial and legal expertise: the PAC Shield. To eliminate your exposure, involve us at the PSA level.