Term Employee going through a divorce

[Guest lindamichals]

My client is very concerned regarding a terminated employee who has just recently left employment and she is aware of a pending divorce. The plan does not have J&S, therefore, no spousal consent required. The attorney's for the spouse have called inquiring about insurance benefits, but nothing regarding the plan. I told her until the actual QDRO is presented,(it in fact one will be presented) she cannot hold back payment of the benefits to the employee(he elected to roll to an IRA). She wants to know if QDRO's can be paid from IRA's. Can they be? This client is 100% by the book and does not want to do anything incorrectly that would at a later date come back to them. Thanks.

Linda Michals

[Guest mjb]

Since the benefits have been distributed before a DRO was presented to the plan admin there is nothing that can be done at this time. However, there is no issue since the retirement benefits would be disclosed by the employee as part of the divorce proceeding. While there are no QDROs for IRAs,The court could order that the employee transfer part of the IRA to the spouse under a tax free transfer in IRC 408(d)(6).

[QDROphile]

Whether or not IRA assets can be divided has absolutely no bearing on what the plan administrator should do.

The plan administrator must consider the terms of the plan's written QDRO procedures. Some plans provide that reasonable notice that a domestic relations order will be forthcoming will cause the plan to restrict distribution pending further developments. That presents serious interpretation problems and is not advisable. But the Department of Labor informal position is that something like this is the appropriate standard, no matter what the QDRO procedures say. The Department of Labor is wrong unless the plan is stupid enough to adopt the standard for itself.

Unless the plan hobbled itself, I agree with mjb.

[Guest lindamichals]

FYI, the participant has not been paid out yet, he has only made his election.

Since the benefits have been distributed before a DRO was presented to the plan admin there is nothing that can be done at this time. However, there is no issue since the retirement benefits would be disclosed by the employee as part of the divorce proceeding. While there are no QDROs for IRAs,The court could order that the employee transfer part of the IRA to the spouse under a tax free transfer in IRC 408(d)(6).

[Guest mjb]

While I read the post to mean that the participant had been paid, it doesnt matter whether the amount has been paid or not because the plan admin cannot withhold payment without receiving prior notice that a DRO will be issued. I dont see what the issue is since the court can order that the AP's interest be paid from the IRA under a tax free transfer.