2015 Updates for Colorado QDROs - Saving Time

Summary: As of May 2015 I have started to skip the preliminary approval process on many QDROs because of the "newer" long wait times. Since I am familiar with essentially all of the account record holders and third party QDRO processors, I know which QDROs might be at risk for rejection on account of vesting, insufficient balances, etc. Unless a particular QDRO is at risk for rejection, I save time for everyone by skipping the preliminary approval.

Some Plan Account Holders are Padding Fees Through Delay Tactics

In 2014 and now especially in 2015, the financial institution "holders" of 401(k) and similar retirement accounts are slowing the QDRO process so that they can collect more fees.

Many of the financial institution fees are charged on a quarterly basis. Thus, I routinely see long delays so that the "next" quarterly fee can be charged before the QDRO money is moved.

This is particularly true of life insurance companies which have successfully acquired market share by transferring fiduciary fees from the employer to the employee. A good deal for the employer, but not for the employee.

These companies expect that the Alternate Payee (recipient) will take the new QDRO account money away, either through cash withdrawals or a rollover to an IRA or other retirement account with a different financial service company. As a result, they will lose future account fees.

Some QDROs can still be drafted and approved by the Court in 10 days or less such that a cash withdrawal can be completed within 2 to 3 weeks. However, it is becoming more commonplace to see some financial institution account holders take 2 to 3 months (and longer in some cases) to process a QDRO. Thus, I am starting to skip the preliminary approval process in order to speed up the QDRO process.

For Many Cases the Preliminary Approval Process for Colorado QDROs Can be Eliminated

Since I have been doing QDROs for more than 15 years, I understand the preliminary approval process and the risks of drafting a QDRO which might be rejected.

As a result, beginning in early 2015, for many QDROs I have started to eliminate the initial preliminary approval by the plan administrators or the financial institution account holders. It all depends on the risk that the QDRO could be rejected after it is approved by a Colorado Judge. (I am also doing this for some union defined benefit pensions.)

My objective is to speed up the Colorado QDRO process and avoid the gamesmanship that some of the financial institutions are now doing.