QDRO start of "18 month period"

[Guest friedbrain]

When does a plan administrator have to begin segregating the assets of a participant to account for an alternate payee's claim? i.e., when notice by a participant indicating pending divorce, when administrator receives notice by alternate payee or attorney of payee indicate pending divorce, or not until administrator receives a draft of a DRO.

[Disco Stu]

I don't know how you could segregate anything until you receive a DRO that you deem to be qualified.

I have heard of trustees assuming control of the investement direction of participant accounts when they know a DRO will be coming. This would prevent the participant from "scuttling" the account in order to minimize what the ex-spouse will get.

Other than that, the account balance belongs to the participant, and no one else until a QDRO exists.

[QDROphile]

Although I think they are wrong on the law, some DOL representatives have suggested that the account should be protected when the plan administrator receives some sort of notice of impending QDRO (such an anonymous phone call in the middle of the night). By "protect," I think they mean "don't distribute an amount (whatever that might turn out to be?) that might go to the alternate payee under the impending QDRO. There is a federal circuit court case about a plan that froze investments after a hint of a future QDRO. It paid for that bad judgment. It is better to be dumb and just follow normal procedures until you get a domestic relation order in the door. And be sure that your written QDRO procedures say that nothing will be done until delivery of a DRO. Or, if you are the protective sort, try to put some standard in the QDRO procedures about when you will do something and what the something is. But anything beyond simply limiting distributions for a while is risky.

The sovereign nation of California thinks that its civil court procedures provide for preservation of accounts and benefits pending issuance of a DRO. The DOL has been at war with California on several QDRO issues and keeps losing. Part of the problem is that the DOL is fighting on foreign soil.