Expected Actuarial Value should neither increase or decrease because of QDRO

[Guest erepper]

I have a Participant that is eligible for UNREDUCED early retirement but is continuing to work. We have assumptions for early retirement under the plan. The DRO reads that the AP will recieve $2,000/mo from the plan and may commence at any time that the participant is eligible for early retirement. With this language she would probably commence immediately. Does this constitute an increase in the "expected actuarial value" that increased becuase of the QDRO? If so, then I would have to reduce the monthly pension of the participant.

The opposing position would be that the participant could also retire immediately as well which would simply be an "experience loss". Could a possible (likely) early commencement by the AP be viewed similarly as an experience loss?

[david rigby]

Careful review of the DRO. Careful review of the plan document. Very likely that both will already state that nothing in a DRO will be construed to cause the plan's liability to increase (although it won't use that language). If you cannot answer the question, perhaps that means the DRO should not be acceptable as a QDRO.

[Effen]

I don't agree with the "experience loss" idea. The plan would not have experienced the loss since the participant didn't retire. Therefore, this would be in increase in the liability unless you reduce his benefit by the actuarial value of hers. The subsidized early retirement benefits are not subsidized if they are not paid.

You said the DRO was fairly clear that she was entitled to $2,000 per month commencing as soon as he was eligible. If his benefit is worth more than that, than I don't really see that this is a reason not to qualify it. She is permitted to receive it at the "Earliest Retirement Date". The theory that he has a bad attorney is not a good enough reason. Because she is commencing her benefit sooner, she may end up with most of his benefit, but he signed the agreement. I have seen QDROs where the spouse got 100% of the participant's accrued benefit. (I can only assume that he got plasma TV & the dog.)

Anyway, if his AB is worth < $2,000 per month to her, than I think you should not qualify the DRO. That would clearly be subjecting the plan to additional liability.

Often times the spouse receives some percentage of the actuarial equivalent of the Normal Retirement Benefit until such time as the participant qualifies for the subsidy. Once he actually retires and qualifies for the subsidy, then her benefit would be re-calculated to reflect the subsidy.