What happens if QDRO specifies $ amount for alternate payee but acc't

[MR]

suppose a doc gets divorced and the dro indicates the ex is entitled to a specific dollar amount (not to be adjusted for investment gains or losses). what happens if the doc's balance drops to below the amount specified in the dro? obviously the ex can't be paid what isn't there, but where do we go from here?

[jane123]

back to court- this new development could mean the doc paying out less- assuming the loss in value was not orchestrated just to spite the spouse of the doc- like wilfully investing in junk stuff..

[MR]

is it possible for the doc to make the ex whole outside the plan?

[david rigby]

Probably, but that still leaves a confusion with respect to the QDRO.

[Tom Poje]

I guess the answer might depend on when the DRO was received.

you said

what happens if the doc's balance drops to below the amount specified in the dro.

After the DRO was received, I thought the $ had to be segrated while determining if it was a QDRO. It is no longer the doctor's balance. (I guess it would also have to be segrated in a non-interest bearing fund as well, based on your description)

At that point it looks like the burden falls on the administrator for not following the requirements of the law.

If the dro was received after the drop in value, then I don't see how you have a QDRO, since you can't follow the terms of the DRO, and I would agree with jane123 it would be back to the courts.

[Kirk Maldonado]

If the DRO requires a payment in excess of the amount currently in the participant's account I would recommend the plan reject it because it requires payment of a benefit not provided by the plan (i.e., a benefit in excess of the account balance).

[Guest BKH]

If the Alternate Payee is to be assigned a certain stated dollar amount under the QDRO, I require that the QDRO contain the following language: "The Alternate Payee's share shall be $_______, provided this amount does not exceed the Participant's total vested interest in the Plan as of the Plan valuation date that coincides with or next follows thd date that this Order is received by the Plan." If this provision is not satisfied, I would then reject the DRO as a QDRO. Does any one handle this matter differently?

[QDROphile]

BKH: Your solution does not quite work for an order that provides that the the AP will rec eive a specified sum that is not adjused for earnings. If you identify any valuation date, the investments can still lose money unless you invest in a money market thereafter, and you should see another recent QDRO thread for a discussion about issues that arise then because of the positive earnings. The order would have to say something like the following:

The alternate payee shall receive the lower of the following:

(1) $_____________.

(2) 100% of the balance of the participant's account at the time the account is charged with the payment to the alternate payee.

Even this approach has to be adjusted in the event the participant has a plan loan, and it assumes that the funds are liquidated for payment to the alternate payee as of the date the participant's account is charged and not reinvested for later payment to the alternate payee.

I take it quite literally when an order names an amount and says not to adjust for earnings. That means no more and no less than the specified amount. But orders often imply adjustment for earnings, even when they specify amounts. You have to be careful about interpretation of the order.