Is Alternate Payee required to consent to distribution?

[Lynn Campbell]

In a Money Purchase Plan, alternate payee (ex-spouse) is entitled to more than $5,000. Is her consent required before she can be paid? Thanks for all input!

[SoCalActuary]

Some more info might help.

If the alternate payee has a segregated DC account, then the participant ex-spouse already gave consent with the QDRO, IMO. The alternate payee would have to give consent unless the plan is being terminated, where you would simply buy an annuity contract if they did not consent.

If the alternate payee is now re-married, the plan account might be sole & separate property, although this does not appear to affect the 417 regulations.

If the alternate payee is in a pension plan with annuity options, then the current spouse (if any) could have a claim.

[WDIK]

If the alternate payee has a segregated DC account, then the participant ex-spouse already gave consent with the QDRO, IMO. The alternate payee would have to give consent unless the plan is being terminated

SoCalActuary:

I'm guessing there was a typographical error in your post as you seem to be saying that the alternate payee already gave consent and would still have to give consent. Of course I may be guilty of a typographical reading of your post.

[Lynn Campbell]

A little more background: The alternate payee does not have a separate account in the plan. The amount due to her has been agreed upon by both the participant and the alternate payee and is specified in the QDRO. We are drawing up papers for the alternate payee to elect a rollover or a distribution, etc. My question is: can the alternate payee be "cashed out" if she does not return the distribution forms, or must she consent before it can be paid? Thanks again for all your help.

[mbozek]

Silly question: What does the plan provide as payment election for AP? Some plans provide that only option for AP once a DRO is certified is a distribution of the AP's account which will not require consent under the 1.411(a)-11 regs since only a participant with account > than 5k must give written consent. If the the plan permits the AP to remain as beneficiary in the plan after the QDRO is issued then the AP's consent is required for a distribution which exceeds 5k.

[Guest Grabitquick]

What about Reg. Sec. 1.411(a)-11©(6)?

"(6) QDROs. The consent requirements of section 411(a)(11) do not

apply to payments to an alternate payee, defined in section 414(p)(8),

except as provided in a qualified domestic relations order pursuant to

section 414(p)."

[mbozek]

IRC 414(p)(3) provides that a QDRO cannot require a benefit form or option for an AP not provided by the plan. So if a plan provides only for a lump sum payment upon approval of the QDRO the QDRO cannot permit the AP to retain the assets in the plan. 411(a)(11) does not require consent of a beneficary before a distribution is paid.

[QDROphile]

I think it is agressive to use 414(p)(3) to justify a rule for QDROs that is different from the "regular" rules of the plan, especially when used to trump Treas. Reg. 1.411-11©(6). For example, it is fine to use 414(p)(3) to disallow distribution to an alternate payee at a time when the amount is not distributable to the participant, subject 414(p)(4). A QDRO cannot upset the general administration of the plan. But if you believe that the plan can create a separate scheme of more restrictive administration for QDROs, you have to wonder where the limits are.

I do not agree with several of the DOL's postions on QDROs, but you have to take them into account when deciding how to proceed. Q3-8 of the DOL QDRO book takes into account 414(p)(3) and still states: " ... a QDRO may ... give the the alternate payee the right that the participant would have had under the plan to elect the form of benefit payment." Could you justify a plan provision under 414(p)(3) that says alternate payees can receive only a lump sum distribution when there are other options for participants? The DOL seems to say no. Timing is different from form, but the distinctions get very fine. If a plan is going to force out alternate payees, some serious thinking had better go into the decision and great attention must be given to plan terms and review of the orders.

[Guest Grabitquick]

I agree with QDROphile on this one. I would be reluctant to add a provision to a plan mandating an immediate lump-sum to an A.P. (even though the plan has other options for participants), and then use the provision to turn down or ignore a QDRO that provides otherwise. Virtually all defined contribution plans that I'm aware of have a permissive provision: the A.P. can get an immediate lump-sum if the terms of the QDRO provide for it. If the QDRO contemplates other payment options provided under the plan to participants, or allows the A.P. to leave the money in, then fine. Since the large majority of A.P.'s would want an immediate lump sum anyway, this approach seems less onerous than a mandated lump-sum.