DRO Benefit Split Upon Participant's Death

[Guest pension222]

The order specifies that the alternate payee is to receive 50% of the participants retirement benefit multiplied by the years of plan participation while married and divided by the total number of years of participation to the participant's retirement date.

If the participant dies the order stipulates that the alternate payee's portion is payable to her on the date the participant would have attained retirement age.

The order does not contain the usual QPSA language.

Let's assume the participant dies while employed and before attaining retirement. It seems to me that the alternate payee is not entitled to anything because when the participant dies, his retirement benefit goes to zero.

Has anyone ever seen a DRO like this? I do not think that it would be qualified since the intent is to pay the alternate payee something if the participant dies prior to retirement and this would require payment of a benefit not provided for in the plan.

[david rigby]

I'd say it sounds like a drafting problem. Your description implies that the surviving alternate payee (I presume this is the ex-spouse) is to get a death benefit, but not before the participant would have reached (early?) retirement age. That is, the DRO may not spell that out, but it sounds like that is the intent.

Probably an issue that should be better addressed within the language of the DRO.

BTW, you did not say QDRO. Is it qualified?

[QDROphile]

If the only benefit payable after the participant's in-service death is a surviving spouse benefit, the alternate payee can only get the portion of that survivior benefit that is awarded under the DRO (an alternate payee that is not a spouse or former spouse can get nothing). If the DRO says nothing about that benefit, the alternate payee gets nothing. It is a drafting problem, and it is legal malpractice (unless the intent was really to stiff the alternate payee), but the most the plan administrator should do about it is put the following in the notice of qualification:

"As provided by the terms of the Order, if Participant dies before Alternate Payee starts benefits, Alternate Payee will receive nothing from the Plan."

If that does not get the attention of the alternate payee, shame on the alternate payee. If that result is not what was intended, they can amend the order. The plan administrator should stay out of what is right or wrong or who is right or wrong except to the extent of maters tha affect qualification. But it is a good idea to alert the parties about unusual aspects of the order, as interpreted by the plan administrator, to avoid an ugly dispute years later when the consequences of the drafting become apparent and the opportunities to fix are compromised.