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The doubt is the lack of clarity in the withholding Code sections and related regulations, and possible inconsistency with the actual taxation of distributions to child AP's. Code Section 402(a) provides that a qualified plan distribution is taxable to the "distributee." Section 402(c)(1) provides that a spouse or former spouse AP shall be the "distributee" for this purpose, but does not address child AP's. I don't know the definition for "distributee" that applies to this section, but it likely is the employee/participant, regardless of who receives the distribution, since an exception was needed to switch the "distributee" designation to a spouse AP who actually received the money. As a result, with no such exception for child AP's, the default rule that the participant is the distributee would apply and he/she would be taxed. The withholding rules under Section 3405, on the other hand, generally refer to "payee," and do not address child AP's. I believe some read "payee" to mean the actual recipient (a term used in the regs) of the distribution, which would be different from the "distributee" who is taxable in this case. If the participant/distributee is the "payee" for purposes of withholding, then it seems the Code requires withholding unless the payee waives it on Form W-4P. In this event, can a state court order serve as the participant/payee's waiver, or can it only be used to force the participant/payee to complete the waiver? Also, Form W-4P permits the payee to elect a greater amount of withholding, so what measures can be taken to prevent the payee from having more withheld than required by law? I've been told that an old IRS Notice (89-25 I believe - can't find it on the internet) appears to indicate the IRS believes the participant is the payee, but there still seems to be uncertainty surrounding this issue. If the child AP is the "payee" does he/she have to waive withholding, or is there no withholding by default because the regs provide there is no withholding if the distribution is not includible in the gross income of the payee/recipient? I have both reviewed QDROs for plans and have prepared QDROs for DR attorneys, so I'm interested in both sides of this issue.

Then I don't see any problem with the suggested solution.

Why would you have plan procedures that you approve something that you can't legally do and then ignore part of the order you just approved? It is just a non-starter in my opinion.

I would simply reject any DRO that "requires" a PA or plan to do something it can't legally do. That alone is sufficient grounds to deny the DRO. So, we agree on the conclusion, not necessarily on the reason (and one should trad cautious when trying to explain to a Court what they have authority to do and not do - that tends to land people in jail for contempt as well).

Well, to answer you question as to whether a PA or TPA would pay any attention to such a DRO is that IT IS AN ORDER OF THE COURT, and once accepted by the PA as a valid "Q"DRO, the plan (and the PA) becomes bound to the order, subject to the contempt powers of the Court issuing it. The time to object to the invalidity of the order is BEFORE it is accepted as a QDRO. I do agree with your subsequent post that "grossing up" the distribution to account for the tax consequences is a legitimate way to accomplish the goal - but that must be clearly spelled out in the order.

There is still too much disclarity for my tastes. What year was the April 2017 18k deferral supposedly for? Was it 2016 or 2017?