QDRO Distribution Question

[Guest JDL]

Our QDRO Procedure specifically provides than an immediate distribution may be made regardless of whether or not the Participant has attained early retirement age under the Plan. We now find ourselves in a somewhat unique situation - as the Participant and the alternate payee are both employees of the plan sponsor and both participate in the Plan. Therefore, I'm wondering, may we still provide an immediate payout to the alternate payee, despite the fact that she is also a Plan participant and to her own account could not get a distribution until she retires, terminates employment, etc? I would think that her status as a Plan participant would have no bearing on her distribution options as an alternate payee, but that is just my hunch. Any suggestions? Thanks!

[Blinky the 3-eyed Fish]

I am not a QDRO expert by any stretch, but I agree with your ascertainment.

[2muchstress]

I am also not a QDRO expert, and I probably agree with your position. However, would it not be possible to xfer the money to the alt. payee's account, place it in a separate source for the QDRO, and then only distribute the QDRO money from that source?

This may be a good issue to refer to ERISA counsel.

[jpod]

You referred to your QDRO procedures as allowing for an immediate distribution, even before the "earliest retirement age."

But, what does the Plan document say?

Nonetheless, the fact that the AP happens to be a participant is irrelevant.

[JanetM]

We have a different twist on our QDRO policy. We view the AP as an ordinary participant. If they do not work for us at the time of the QDRO - they are eligible for distribution as if they were terminated participant. If they work for us - they have not experienced a distributable event and can not take the funds out of the plan.

We have had many QDRO's in the recent past that dealt with married employees and our ERISA atty's agreed this was a safe avenue to follow.

[QDROphile]

JanetM

Assuming a providently drafted QDRO, what are you going to do when an employee who is an alternate payee demands a distribution when the former spouse reaches age 50?

What do you do about a demand for payment when the former spouse terminates employment and the alternate payee remains employed?

[JanetM]

I suppose I can start by saying - the situation has never come up. The few we have had - the AP left first. Each was case of young admin asst and older exec getting married.

I suppose when the issue comes up I will call atty and see what we have to do.

[jaemmons]

I still don't understand what there is to review with an attorney. The AP's availability of distribution due to a QDRO is predicated upon the former spouse's ability to take a distribution from the plan. The plan document would specify the application of the earliest retirement age rule as to when an AP can receive the QDRO payment. The fact that they are a participant in the same plan does NOT preclude them from taking a QDRO payment from their former spouse's account, since the distribution timing is based upon the former spouse and not the AP's status as a current plan participant.

[pmacduff]

FWIW - I agree with jaemmons, the QDRO stands alone and the fact that the AP is also a plan participant is meaningless here.

[E as in ERISA]

I think that one needs to read the actual provisions of the plan in order to determine whether the QDRO distribution or standard distribution provisions apply in this case. It appears from the stated facts that the provisions do not overlap and that the likely outcome is that the QDRO provisions prevail here.

But what if they are actually a little more ambiguous -- e.g. what if the standard distribution terms provide something to the effect of "a participant may not receive a distribution of any benefit under the plan until retirement or termination." Then it may be necessary to determine whether that provision applies not only to the spouse's interest as a participant, but also to the spouse's interest as an alternate payee.

[jaemmons]

Katherine,

That provision would apply only to benefits accrued and being distributed from an individual participant's account. The AP as a plan participant may be restricted as to when they can take a payout from their own individual account balance, but it does not preclude them from taking their "assigned" benefit from their former spouse's account in lieu of a QDRO, as long as the document allows for payment prior to the "earliest retirement age."

[E as in ERISA]

Do you reach that conclusion because it is inherently obvious to anyone who reads that statement that it does not apply to QDRO benefits, or is it based on your in-depth knowledge of the QDRO rules?

[jaemmons]

both.

[E as in ERISA]

Good job! You saw my trap! If you had answered that it was your "in-depth knowledge of the QDRO rules," then I would have said you were making a legal interpretation!