GAO: DOL Could Do More to Help Make QDROs More Accessible

A new report from the Government Accountability Office looks at the barriers people face when seeking to obtain a Qualified Domestic Relations Order (QDRO) and offers recommendations on how the process can be improved.

 

In “DOL Could Better Inform Divorcing Parties About Dividing Savings,” the GAO examines what is known about the number of QDRO recipients, the fees and other expenses for processing them, the reasons plans do not initially qualify DROs and the challenges experts identify regarding the QDRO process.

 

Sen. Patty Murray (D-WA), the ranking Democrat on the Senate Health, Education, Labor and Pensions (HELP) Committee, had requested the study to look at the barriers women face in obtaining paperwork required to divide pensions or retirement accounts following a divorce, and the process for obtaining a QDRO.

 

“We already know that because the economic inequalities women face compound over the course of a lifetime, they face a huge retirement gap and higher likelihood of struggling with poverty in retirement,” Sen. Murray stated in releasing the report. Murray added that she plans to look at how to address the issues raised in the report, as well as “what other steps are needed to make sure getting a divorce doesn’t mean giving up retirement security.”

 

 

According to the GAO’s report, there apparently is no nationally representative data on the number of QDROs, but plans and recordkeepers the agency interviewed and surveyed reported that few seek and obtain QDROs. GAO’s analysis found that about one-third of those who experienced a divorce from 2008 to 2016 and reported their former spouse had a retirement plan also reported losing a claim to that spouse’s benefits.

 

To conduct the review, GAO analyzed available data and a total of 14 responses from two surveys of large private sector plans and account recordkeepers. The agency also interviewed 18 experts including practitioners who provide services to divorcing couples.

 

Many of the experts interviewed reported that some people—especially those with lower incomes—face challenges to successfully navigating the process for obtaining a QDRO, including complexity and cost. In addition, individuals seeking a QDRO may be charged fees for preparation and review of draft orders before they are qualified as QDROs, and these fees can vary widely, according to the individuals interviewed.

 

The interviewees also cited concerns about QDRO review fees that they said in some cases were more than twice the amount of typical fees and said they may discourage some from pursuing QDROs. Divorcing parties who pursue QDROs often had orders not qualified due to lacking basic information, according to plans and recordkeepers surveyed by GAO.   

 

 

Because the DOL generally does not collect information on QDRO fees, the GAO recommends that the department explore ways to do so—including plan service provider fees the plan passes on to participants—and evaluate the burden of doing so. For example, the GAO notes that DOL could consider collecting fee information as part of existing reporting requirements in the Form 5500.

 

The GAO also recommends that the DOL take steps to ensure that information regarding the requirements for QDROs is available and easily accessible. For example, the DOL’s Employee Benefits Security Administration (EBSA) could develop a checklist of documents and information that parties could use to help draft a DRO that would be more likely to be qualified as a QDRO on a plan administrator’s first review. In addition, the GAO suggests that EBSA could conduct outreach focused on QDROs to practitioners.

 

According to the GAO, the DOL provides some information to help divorcing parties pursue QDROs, but many interviewees cited a lack of awareness about QDROs by the public and said DOL could do more to make resources available to divorcing parties. “Without additional outreach by DOL, divorcing parties may spend unnecessary time and resources drafting orders that are not likely to be qualified, resulting in unnecessary expenditures of time and money,” the report states.

 

 

In its comments, the DOL generally agreed with the GAO’s recommendation to consider ways to collect additional information on fees and said it would informally engage with interested stakeholders. Although the agency did express concern about establishing a reporting obligation and noted that there may be other ways to collect the information that minimizes the burden on plans.

 

The DOL also generally agreed that it should take steps to ensure that information regarding the requirements for QDROs is available and easily accessible, noting that it had already updated information on its website, but suggested that a checklist may not be needed because similar information is already included on the agency’s website.

 

 

Murray introduced the Women’s Retirement Protection Act to strengthen consumer protections to safeguard retirement savings, help increase women’s financial literacy, and provide support to low-income women and survivors of domestic abuse seeking retirement benefits following a divorce. Among other steps, the bill would establish a grant program within the DOL that would support community-based organizations to assist these women in obtaining QDROs. A similar provision was also recently included the House-passed HEROES Act.

 

The senator also indicated in July that in addition to making QDROs more available, she plans to seek action on legislation extending the same spousal protections that women receive for DB plans to DC plans. She also noted that she would look at changing the RMD rules so that women can delay taking distributions from their retirement accounts because of longer life expectancies.