When should California Joinder Pleadings be done?

What are joinder pleadings?

California Joinder Pleadings (“Joinders”) which join a retirement plan in a divorce case are an attempt to stop a plan participant from touching retirement funds that a former spouse (“alternate payee”) may be entitled to by providing notice to a plan of a divorce or pending divorce. In many cases, Joinders sent to a plan may trigger a hold on the plan benefits until a qualified domestic relations order (“QDRO”) is served on the plan. It may stop a participant from retiring or otherwise moving funds. Most parties want this protection.

Joinders are required for all California Public Plans (e.g., CalPERS, CalSTRS) and a few private plans. Joinders must be filed with the court and are signed by a court clerk. Information from California Judicial Counsel form FL-318 “Retirement Plan Joinder – Information Sheet” also outlines when Joinders may be done.

What are some examples of what can happen when Joinders are NOT done?

The parties divorce before the participant is retired and receiving a monthly benefit. After divorce, the participant retires single or is married to a subsequent spouse. Not only does the participant’s action cause the alternate payee to miss out on receiving alternate payee’s share of a monthly benefit while the participant is alive until a QDRO is done, but even more critical the alternate payee loses out on receiving a benefit paid over alternate payee’s lifetime. This means when the participant dies, benefits stop being paid to the alternate payee.

The parties are divorced and the participant has a 401k during the marriage that needs to be divided with a QDRO so the alternate payee gets alternate payee’s marital share. But the participant decides to take out a loan, move the money to an IRA or some other account or withdraw the money to spend it. When it comes time to do the QDRO, the money to pay the alternate payee is gone. A QDRO cannot be done for the alternate payee to receive his or her share from the plan. The only option for the alternate payee is to go after the participant for the loss of alternate payee’s interest in the plan which costs money and time with an uncertainty that the missing funds will ever be found.

But isn’t there a restraining order in each divorce automatically stopping a participant from touching 0any retirement accounts?

When the parties start a divorce, there is a temporary restraining order in effect until the marital property has been divided. What this means for retirement benefits is that a participant should not commence or alter the retirement benefits until a QDRO has been served on the plan. However, in many cases (which we unfortunately hear about after the fact), there are no funds in a retirement account because the participant withdrew the money or there is no lifetime benefit that can be paid to the alternate payee because the participant retired after divorce. The reality is that the participant is rarely held liable by a court for violating the restraining order. Unless the divorce has a lot of assets, most alternate payees do not have the money to return to court to hold the participant responsible and to try to locate the missing money if it has not already been spent.

Before a QDRO is filed, a plan will not stop a participant from retiring or moving funds unless that plan has adequate notice to place a hold on the account due to divorce. For private plans this hold issue is covered in 29 USC §1056(d)(3). For a state public plan, whether the plan will place a hold on a retirement account before it is sent a filed QDRO depends on the rules and regulations for that plan. However once served with Joinders, most plans will place a temporary hold on a retirement account until the QDRO is completed.

The only plans that we know for sure will NOT place a hold are military plans and federal employee plans. These plans will only place a hold once they receive a QDRO. You must get the QDRO done ASAP after divorce or better yet file the QDRO when the divorce judgment is filed.

What is the difference between a Notice of Adverse Interest and Joinders?

A Notice of Adverse Interest (“NAI”) is another way to attempt to place a hold on retirement accounts until divided with a QDRO. QDROCounsel recommends that all eligible plans be sent the NAI except for California Public Plans (e.g., CalPERS, CalSTRS) and a few private plans that require Joinders. Unlike Joinders, NAI does not need to be filed with the court so plan protection happens faster. Of course in California, the parties can join most plans but it does take longer since the pleadings must be filed with the court and signed by a court clerk. QDROCounsel has automated both NAI and Joinders so once we receive the necessary information, these documents can be drafted quickly.

In summary NAI is generally quicker to accomplish the same result as Joinders. But the most important point is to do either form of plan notice and some parties in California will actually do both NAI and Joinders!

Why don’t more people know about this?

Most family law attorneys are not aware of this issue. Most QDRO attorneys only tell a party about the need for Joinders if there is concern about a participant retiring or withdrawing money. And only about 20% of people divorcing even go to an attorney. Consequently, there are likely a lot of alternate payees not receiving what they are owed in the divorce. The reality is that if a participant moves funds or retires in violation of the divorce restraining order before the QDRO is done, there are rarely any consequences for the harm done to the alternate payee.

An alternate payee's right to alternate payee's marital property interest in retirement benefits is NOT protected until a QDRO is filed and served on the retirement plan, especially in the event of participant's death or remarriage and retirement. See Carmona v. Carmona (9th Cir 2010) 603 F.3d 1041, Hopkins v. AT&T Global Information Solutions Co. (4 Cir 1997) 105 F.3d 153. However, since a temporary hold may be placed on a participant’s account, sending the Joinders for California cases to a retirement plan is the best way to attempt to preserve the alternate payee's interest in that plan until the QDRO is filed.

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