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Among the many issues in the ABB fiduciary-breach litigation, the plaintiffs asserted that allowing Fidelity to lower fees for other services, including payroll services, because Fidelity was getting more than enough revenue from retirement plan investments and services was a fiduciary breach and a nonexempt prohibited transaction. From Judge Laughrey’s opinion: “[O]nce Mr. Scarpa became aware that the PRISM [401(k)] recordkeeping fees appeared to be subsidizing ABB’s corporate programs, he had a fiduciary obligation to investigate and prevent any future subsidy.” Tussey v. ABB, Inc., No. 06-cv-0430-NKL, 52 Empl. Benefits Cas. (BL) 2826, 2850, 2012 BL 84927, 2012 U.S. Dist. LEXIS 45240, 2012 WL 1113291 (W.D. Mo. Mar. 31, 2012) (finding loyalty and prudence breaches), further proceedings not cited (the case litigated for 12¼ years).

A few thoughts: In large companies (public companies, etc.) with professionally managed nonqualified plans that are largely 401(k) equivalents, I think there is little reason to omit QDROs. There's usually an accessible pool of mostly vested and fully funded (often in a rabbi trust) money that is easily divided like a 401(k). Allowing QDROs in nonqualified plans can reduce burdens elsewhere. For example, if one spouse has a large NQDC plan balance but few other liquid assets, usually both spouses would prefer a simple transfer of money from the plan, as opposed to selling real estate, etc. to divide the proceeds. If the plan does not allow QDROs, this won't be an option, even if preferred by both spouses. The major exception, at least in my dealings with primarily private (and often small) companies, is the various types of nonqualified plans that don't neatly fit into the first category above. For example, a SAR plan or a phantom equity plan that pays out based on the growth in value of the company on a future date or upon a sale of the company. If no one can calculate or pay the benefit amount until the company is sold or the participant reaches retirement age, how would you divide the benefits and pay them to an ex-spouse? Also in the small-company context, the company is less likely to be fully funding future benefits on an ongoing basis (often preferring to deal with future payments, at least in part, out of future cash flow) so allowing early payment for a QDRO can cause liquidity problems as well.

Almost makes you want to call the DOL and report them.....

My experience, over a few decades, is with SERPs: non-qualified DB plans. NONE of them have included anything related to a DRO. This is true even if the SERP's sole function is to provide benefits otherwise limited by 415 and/or 401(a)(17). Likely, the reasoning is that the Employer has no interest in whatever family matter is behind a DRO. Also, there are more complicated tax issues, as compared to a qualified plan.

Well, I guess there is a fine distinction sometimes between "knew" and "understand." I would say that they "knew" but I doubt they really had an understanding. Honestly, I don't know the arguments AGAINST including QDRO provisions - my general thought would be, "Why not?" I'll be interested to see how the discussions here play out.

My experience in this arena is limited, so I can't really address your questions. I can say that all the 457(b) plans for tax exempt or governmental that I've seen include QDRO provisions.

Yeah, I kinda feel like this has to be enforced at the front end. If not...shrug.

NHCE? Why is there even a limit? What about a retro amendment to remove the limit (for NHCEs)? If you refund I think you exclude from ADP test if NHCE but not if HCE, but don't know that part for sure.

agree with your assessment

Damn, I opened a hundred packs of bubble gum and not one Joe Schlobotnik!

This sounds like it would fall under the definition of an "overpayment" under both EPCRS and SECURE 2.0 sec. 301, so you do have some correction options. I think the easiest thing to do might be to reduce the future payments. You could also amend the plan to increase the benefit so that the actual payment becomes the correct payment. The plan could ask the participant to repay the excess. What I would probably not do, is decide not to seek recoupment of the overpayment and just let the participant keep it. While this could be an acceptable option under SECURE 2.0 sec. 301 in certain cases, there is an exception for when the participant is culpable. In your case since the participant is also the sponsor, I think there is too much risk that they could be considered culpable, even if it was just an honest mistake. There is also an exception that this is not allowed if it would cause the plan to violate 415 or 401(a)(17) - I don't know if that applies in this case. Regarding spousal consent, is the benefit being paid in a form that requires spousal consent? If it's a QJSA or QOSA then the spousal consent wouldn't be needed. If it's some other form of annuity benefit, then the correction under EPCRS is to get the spousal consent now. Withholding isn't mandatory on periodic distributions. Ideally the participant would have completed a W-4P for 0% and given it to himself (as the plan administrator). If that wasn't done before, do it now.

Just to close the circle, one hopes that the Plan Administrator offered this participant the ability to have a Direct Rollover distribution, without assuming the payment should be cash. Written offer, written response.

As a further clarification to CBZeller's note that participants must have the same effective opportunity to make catch-up contributions, IRS 414(v)(2) says: This language allows for a plan to limit catch-up contributions to an amount that is lower than the catch-up limit. The Joint Committee on Taxatation General Explanation of section 109 of SECURE 2.0 says in part: This reinforces the idea that the SECURE 2.0 increased limits are themselves optional.

I'm going to have to disagree. 1.414(v)-1(e)(1)(i) says (emphasis added): This doesn't require that everyone be allowed make the maximum amount of catch-up permitted under the law, it only requires that the same limit be available to everyone. So, I think you could ignore the 60-63 catch-ups and limit everyone to the regular catch-up limit.