QDRO - Division of Account Balance

[Guest DUKE C]

I have a participant who had an account balance prior to her marriage. I was under the impression you could exclude this balance from the QDRO and use the amount accumulated after the marriage. Now I am not sure about the earnings on the prior account balance, if you could exclude this or not. This participant's attorney is telling her she will need to divide the prior account balance also in her QDRO. Which is the correct method to use?

[jaemmons]

I hate to say it but the attorney may be correct. Although there are court cases which have ruled that benefits accrued prior to marriage are excluded, many have ruled in favor of her attorney's statement. In most states these assets are included as part of "community property" and would be included in any marital asset division.

[Guest DUKE C]

We are not a community property state. Would this make a difference in your answer?

[jaemmons]

Not really. It is more or less a decision made by the court during the marital asset division. Unless the ex-spouse waives rights to the assets accumulated prior to the marriage, I am going to have to lean on the side of her attorney. Sorry.

As a side note, just because a court issues a domestic relations order for division of qualified retirment assets, doesn't make it "qualified" until the plan administrator has done so.

[QDROphile]

You are asking for trouble if you get involved with how or why the individuals are choosing how to divide benefits. As far as a plan is concerned, there is no right answer and the only thing that matters is administrative ability to follow the instructions for division, satisfaction of the qualification requirements, and compliance with the plan's written QDRO procedures.

[mbozek]

As a general rule only property acquired during the term of the marriage is subject to equitable distribution or community property laws. See NY Domestic Relations Law Section 236(B)(1). Property acquired by inheritance or gift during the marriage is also excluded from ED or CP. However, courts have great latitude on how to divide property under ED and CP laws. I dont think a plan admin or TPA has standing to contest the amount of benefits awarded to the ex-spouse. There is also the possibility that the attorney may not know how the law applies to retirement benefits.