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I've run into a lot of lazy drafters lately. Reusing the same DRO over and over, often having incorrect plan names and other things left over from the previous DRO. We kick it back and they change half of the items we asked them to correct. Some will even get the order signed without fixing all the items....

Because the critical aspect of my response has been emphasized, I wanted to reiterate the reassuring part. I doubt that it is your fault that the plan has rejected submissions. The plan will not give your ex spouse the entire retirement benefit simply because of firing before the plan accepts your court order as a qualified domestic relations order. However, if certain things happen, or fail to happen, after the firing and before the order is determined to be qualified, you could lose your entire interest in the benefit. It is too complicated to walk through the possible scenarios and touch on all of the procedural requirements to be able to say that you are completely safe. It appears that the plan has been engaged, has been notified of the domestic relations proceeding, has received communication about the award of an interest to you, and will continue to be engaged in processing what you hope will eventually be a QDRO. This probably protects you as long as the as qualification processing is being pursued diligently. The devil is in the details and there are many devilish details that we do not know. Next to incompetence, delay is your biggest concern.

That's true, but you won't have actually contributed $3,200 to a health FSA in a two-month span. You'll have contributed a fraction of that, although you will have had the full $3,200 available. You could have had the full $3,200 election amount available reimbursed without affecting your HSA eligibility for the other ten months.

For what it's worth, I think practically speaking option 2 covers the most ground. You followed the document (and law) by allowing diversifications during the plan year based on the most recent valuation, but have built in a mechanism to ensure the participants are not harmed in the end. The deal is not close enough to know the final transaction value. If there's not a binding LOI, one more month will not produce a final deal value either. At this point in the year, you'll be lucky to close by year-end, which means you'll need to decide if you want to skip payouts altogether for the entire 2024 plan year. As I'm sure you've seen, deals fall apart well past the signed LOI stage, so in my mind trying to approximate the deal value a month from now and pay it to diversifying participants is a non-starter. An interim valuation would not help, in my view, unless it also accounted for the pending sale, likelihood of closing, etc. Option 1 presumably would require an explanation to participants, as ESOP Guy notes. I'm not sure what added benefit would be achieved by not diversifying at all. Plus, it seems to me that it would pretty clearly violate the plan document and statutory diversification requirements. In almost all cases with a strategic buyer, the deal value will be higher than the most recent valuation (if it's not, that's a separate fiduciary concern), so in reality you're likely only to be increasing prior payments.

I stand by the idea 1 or 2 is what I see the most with 1 being very common. I see the virtue of 2. One of the big issues here really is can they even tell the employees. I can't tell you how many times in the decades I have worked in the ESOP world I have been looped in by management they are in talks and told to keep the number of people in my own firm who are told to a minimum. They want their ESOP TPA's input but the non-disclosure agreements make it very hard to tell the employees. The fact the sale isn't final means you don't in fact have any actual hard numbers to give the employees. I have seen deals at the letter of intent stage fall through. In the end almost no one in the company knew anything about how close the company came to be sold. I get the whole retirement plan issues but you can not lose track of the regular business issues and balance them with retirement plan issues. Once again there are court cases out there where people got paid and shortly later the company was sold for a lot more. A court required fiduciaries to disgorge gains to pay people who took a distribution at the lower price to get them up to the sales price. Paying a good attorney who can look at all the facts whole can guild the fiduciaries is cheap insurance in my mind here.