New 2013-2014 Developments in Colorado QDRO

Summary: During 2013-2014 I have seen more and more undisclosed "review" fees. $300 to $1,300. More and more employers are "outsourcing" their responses to QDRO questions and reviews of proposed QDROs. The new fees have become such a problem that beginning November 1, 2011 federal law requires that all such fees must be disclosed. However, they are not being disclosed. Also, the insurance industry is taking over the 401(k) business and charging much higher fees.

More and More Plans Are Charging Undisclosed QDRO "Review" Fees; a Slower Process Now

During 2013-2014, "review" fees are becoming more common. Review fees are fees that employers are passing on to their retirement plan participants. Most of them are not flat fees. Instead, they are hourly charges or are charged based on the number of contacts made with the reviewers.

Usually the review fees are charged by independent contractors instead of the employers. The employers are now hiring the independent contractors so that the employers can reduce their employment overhead costs.

The independent contractor fees are charged to the retirement plan participants instead of to the employer.

Very rarely are these review fees disclosed. Instead, they are deducted from your retirement plan account. Usually the fees are split between the two QDRO parties, the Participant and the Alternate Payee. You are never told about them in advance.

Based on my questioning, it appears that the review fees are running $300 to $1,300.

In addition to the undisclosed charges, a big problem with the review fees is that the QDRO process is becoming a much slower process. The reason that it is becoming slower is because the reviewers want to charge as much money as possible. They know that the longer the process drags out, the more they can charge. (Sound familiar?) As a result, they are slower to respond to any questions for documents and much slower to "review" a draft of the QDRO before it goes to the court. Instead of a quick email or fax, they like to communicate via snail mail (Postal Service). Apparently they get paid more for each snail mail letter that they send out.

The "Review" Fees and Other Fees Must be Disclosed Beginning Nov. 1, 2011

Since these undisclosed review fees and other plan fees are becoming more and more of a problem, In October 2010 a new federal law was passed which requires a number of new disclosures, including the QDRO review fees.

Beginning on November 1, 2011, these review fees as well as other QDRO and retirement plan fees and other specifics must be disclosed.

However, many of the fees are being charged, but not disclosed.

The Insurance Industry Takeover of 401(k) and Similar Plans, Particularly in 2013-2014

Particularly the past 3 to 4 years, the insurance industry has taken over the administration of most of the defined contribution plans. They are the 401(k), 403(b), etc. plans. They have done this by reducing their fees to the employers and plan administrators and shifting the fees to the employees. And I believe that the fees charged to the employees (plan participants) have been sharply increased. A related issue is that insurance companies are slower to respond to QDRO questions and approvals, because they know that many of the alternate payees will withdraw the new account in cash, thereby reducing the fees to the insurance companies. The insurance companies want to keep the cash in the plan, so that their collected fees are higher.

Normally a QDRO can be successfully drafted within a few days (sometimes within a day). Some of insurance companies are adding a month to the process.