Illegal withdraw of 401k funds

[Guest loconnell]

Is there any recourse when 401k funds are distributed to the participant after a Final Decree of Divorce is entered giving the participant's wife a portion of the 401kfunds? The funds were distributed prior to the time the QDRO was prepared and entered with the Court.

[QDROphile]

Did the plan administrator have notice of the decree before the distribution?

Whether or not the plan can get dragged in, there is probably some recourse under state law. The participant has disobeyed the decree by taking the entire balance.

[mbozek]

Did the plan admin have knowledge of the divorce decree and pending dro which was to be submitted to the ct at the time the distribution was paid out?

[Guest pjb]

To clarify...even if the PA had knowledge of the divorce decree, my understanding is the plan pays benefits until the date of receipt of a signed DRO. I also understand a plan may adopt written procedures for handling pending DROs that require placing a hold prior to receipt of a signed DRO. But, I would think this would only be contingent on receipt of something in writing indicating a DRO is being sought.

[Harwood]

I like California Code Section 755(b) on written notice:

". . . if payment or refund is made to a participant or the participant's, employee's, or former employee's beneficiary or estate pursuant to an employee benefit plan including a plan governed by the Employee Retirement Income Security Act of 1974 (P.L. 93-406), as amended, the payment or refund fully discharges the plan sponsor and the administrator, trustee, or insurance company making the payment or refund from all adverse claims thereto unless, before the payment or refund is made, the plan sponsor or the administrator of the plan has received written notice by or on behalf of some other person that the other person claims to be entitled to the payment or refund or some part thereof."

[Guest pjb]

Interesting...surely this law isn't intended to apply to anyone who makes a claim for a participant's benefits. On what basis do you feel this state law would apply to ex-spouses prior to receipt of a DRO?

[Harwood]

I think it makes perfect sense for plans to have a QDRO procedure that is in sync with the California law: if a plan receive written notice that a QDRO will be sought, a hold is put on making distributions to the Participant.