QDRO payout

[Guest Gordy]

As we were doing the accounting we see a large payout. It was to payout the wifeas part of a disolution agreement. Husband and wife were owners of the business. Husband and Wife are both particpants in the defined benefit plan. Her benefit was 207,000. His 350,000. THey agreed that she is to get 545,000. This was in fact paid out. The QRDO (that they just gave us) says that the wife gets 50% of his benefit.

1. Their intent is for her to get 545,000.

2. Would the cleanest way to handle this be to say the 545,000 represents her 207,000 of benefits plus 338,000 of his benefit? If so the Qdro needs to be changed. Agree? Does there need to be a separate QDRO addressing her 207,000?

3. There was no other distribution paperwork signed regarding the distributions. They just transfered the money into an IRA under her name. So, if she took 207,000 prior to being legally divorced he needs to sign off as the spouse. Agree? It's not perfect but obtaining currently dated signatures on the paperwork doesn't hurt. Wife did terminate employment prior to rolling over the monies.

4. Of course no letters were sent by the plan to participant or alternate payee notifing them of the QRDO or its "approval". Husband is a trustee under the plan wife was not. Do we issue the letters currently and note they are "retro active"?

Is this serious enough for a voluntary compliance filing (if applicable)? Any thoughts and comments will be appreciated.

[QDROphile]

Distributions have to be in accordance with plan terms and QDRO trems. Among other things, that means certain acts by certain persons have to be performed at certain times in a certain order. Certain documents with certain terms have to be generated and delivered at certain times. When things are not done or are not done in the proper time frame or do not comply with plan terms or QDRO terms, you have some sort of violation, omaybe more than one. This is all the more important when you are dealing with owners, who are the most inclined to disregard the rules and least likely to get sympathy from the IRS. How you fix things depends on the circumstances and may involve only making sure that the right documentation is prepared to fit what happened, assuming what happened can be reconciled with what is legally permitted and everyone involved agrees with the outcome. Corrections almost always should be done in accordance with the IRS procedures; a filing is sometimes necessary and sometine desirable even if not necessary. Attaching "retroactive" to what is done, by itself, is meaningless. This looks jumbled enough that legal help is a good idea.