QDROs and Loans

[davef]

If a QDRO awards the alternate payee the entire amount of a participant's account, EXCEPT for the outstanding loan, am I correct in assuming that there is now an "adequate security" problem? If the plan does not permit collateral other than the account balance, could this be a reason for rejecting the QDRO on the grounds that this would be contrary to the plan document by requiring outside assets to be used as security for the loan?

[Guest [Pat M]]

Try checking the Plan's(required)written rules for QDRO Admin. We require the Plan Administrator to specify loan requirements in writing.

[QDROphile]

If a person had a loan and through bad investment choices or simply a down market reduced the remaining account balances to below the loan amount, would you have an adequate security problem? One could argue that adequate security is measured at the time of the transaction. But it is still better to deal with this in a way that is comfortable to the plan in the plan's written QDRO procedures. What is comfortable? Ask an appropriate advisor. The plan could restrict aa distributions to the AP until the security issue evaporates or resrict distributions in amounts in excess of the loan balance if the plan worried about the security issue. But the restrictions need to be in the QDRO procedures and the plan document can't be contradictory.