BombyxMori

This is a new one to me. Has anyone ever dealt with this? A participant died and left a 60-month preretirement death benefit payable. No beneficiary designation, no spouse, no children. The plan contacted his mother, who would be the default beneficiary under the plan terms. She said she wants nothing to do with it. Apparently the participant has a sister as well, but the mother said the sister wouldn't want it either (she would be next default beneficiary after the mother). What would you do if the default beneficiary refuses to apply for the benefit? I'm also assuming that we wouldn't be able to get her to fill out and submit a formal disclaimer of interest.

This is a new one to me. Participant is retired, had commenced his benefit and was in pay status, but then went missing and cannot be located - his payments are suspended. Then, a shared interest QDRO awarding a portion of his payment to an alternate payee. He's not currently being paid, but when he is located he will be paid back pay of his benefits that have been due. If his benefit were suspended by the plan for returning to work or something of that nature, then of course payments to an alternate payee would be suspended, too. But, technically his benefit isn't suspended by the plan here, the plan just doesn't know where to send it. To pay the alternate payee or not? If not, then the alternate payee would get a lump sum of back pay representing its share, as well, once he is located - but I don't see why the plan could not pay the alternate payee in the meantime, instead. Does anyone know if there is any rule or guidance on something like this?

Question - has anyone ever heard of any enforcement of this provision by any agency? It's been well established that there is no private cause of action to enforce it. I can't find that HHS has ever taken any action to enforce it. In theory, being out of compliance with it could trigger the excise tax under IRC 4980D, but does anyone know if the IRS has ever sought that? I cannot find any IRS guidance on it. Has there been any consequence for failing to remove exclusions of certain types of provider, for self-insured health plans? There are basically no court cases about this other than ones dismissing private actions.

Is there any consensus on whether a Plan should rely on a QDRO when it has reason to know that the QDRO conflicts with the underlying divorce decree's division of property? If you receive a QDRO, you review it, determine if it meets the requirements of a QDRO under ERISA, and if so, you implement it. Does that change if you get extraneous information, like if you also happen to receive the divorce decree and the QDRO does not appear to reflect it accurately? Does a duty to investigate arise? Or is the plan required to implement the terms of the QDRO and not look beyond this? From what I have seen, different states have different rules about modification of a final divorce decree. Accordingly, different state courts have come to some different conclusions about the validity of a QDRO that conflicts with the divorce decree, based on whether state law allows it as a modification. But, this issue arises in disputes between the parties to the divorce. It seems to me that it can't be the case that a Plan has a duty to inquire or to know, under the state law of various states, whether a QDRO should have been entered or not, if, in fact, it was entered. If you receive it and it is signed and court-certified, but you also receive the divorce decree, and they're inconsistent, does a Plan ever have a responsibility to determine whether it was a permissible modification of the divorce decree? The 2010 regulations at 2530.206 seem to suggest that Plans shouldn't take this into account. "... a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order." Would you read this to mean that, when the QDRO is subsequent to the divorce decree and is inconsistent with it, that it shouldn't fail to be a QDRO on that basis? However, if it is void under state law because it impermissibly modifies the final divorce decree, then it is not an order "entered pursuant to state law," is it? But, are Plans ever responsible for raising that? Or is that strictly for the parties thereto to work out?

Thanks Larry, that's very kind of you. RatherBeGolfing: I think it is a concern for the plan, as IRC 3405 makes the payor liable for depositing the withholding. If the participant does not elect out of the 10%, then the payor (the plan) would be liable for it, in my view. I don't think that a QDRO draining his account and the plan paying it out accordingly would constitute an election on the participant's part, I think it has to be affirmative.

The division of child support wants essentially the participant's entire account for back child support, and there is not enough left in his account to gross up to account for the 10% voluntary withholding that applies under 3405(b). Under 3405(b), 10% is the default (because this is not rollover eligible) but the participant is permitted by that statute to elect anywhere from 0% to 100% withholding. This does not do much to help the division of child support get the exact amount that they want. It seems that this only works if a QDRO may also order the participant to elect no withholding on this distribution so that the plan may pay the full amount "net" of (0%) withholding. But I cannot find any guidance or even examples of this being ordered. I figure it must be possible or else child support QDROs have a sort of intractable issue. Has anyone ever encountered this or seen any guidance on whether a QDRO can order a taxpayer to elect not to withhold taxes?