Amended QDRO?

[Guest jmlumpkin]

We recently processed a QDRO for the provision of child support. For the sake of argument, let's assume that the Order met the definition of a QDRO, establishing the former spouse as the Alternate Payee for the provision of child support.

This order was requested and drafted by a child support enforcement agency. However, the final order did not reference them specifically...only the former spouse as the Alt Payee.

Upon processing the order, we were contacted by the child support enforcement agency indicating that the distribution MUST flow through them. Otherwise, the Participant would not get "credit" for paying support in the amount assigned to the Alternate Payee.

I would assume that an amended Order is necessary to accomplish payment through the agency. However, I'm not quite sure how the amended Order should be drafted as, pursuant to applicable guidance, the alternate has to be a spouse, former spouse, child, or other dependent. How can I, as the plan administrator, facilitate payment to the former spouse throught this agency?

Any insight would be greatly appreciated.

[Mike Preston]

Upon processing the order, we were contacted by the child support enforcement agency indicating that the distribution MUST flow through them. Otherwise, the Participant would not get "credit" for paying support in the amount assigned to the Alternate Payee.

I would contact that agency and see if they would accept a check made payable to the alterrnate payee, but that the payment should be sent to them for delivery to the alternate payee. If they accept that, and then the alternate payee directs you to forward the check to the agency, I think it is case closed.

If the agency wants the check made payable to them, I think the plan should ask an attorney for guidance.

[QDROphile]

What happens if the alternate payee elects a direct rollover? Just thinking.

It does not matter to the plan, but I wonder how much credit the participant will get for the distribution, the amount distributed or the amount delivered net of withholding?

Were it not so sad, it would be funny how little the agencies understand what they are doing compared to how adamant they are about it.

[Mike Preston]

I didn't think that distributions made for child support could be rolled over, directly or otherwise.

And in this case, I think the net check is precisely what the participant should be getting credit for. Child support is an after-tax payment so it is entirely appropriate to have the taxes withheld, if any, go to the credit of the participant and not count towards whatever the agency is scoring on his/her behalf.

Unless things have changed a lot since I last looked into this, which wasn't that long ago.

[QDROphile]

The identity of the alternate payee determines whether or not a distribution is an eligible rollover distribution, not the purpose of the award.

If the agency drafts/issues an order for an amount to be distributed, and the agency does not figure correctly on withhholding (could that possibly happen?), then the amount delivered will not be the amount the agency wanted. The agency then has to get another order for the shortfall. That was my point. I was musing about real world questions, not what should be. Or perhaps I was asking if the agency "should be" bound by the legal consequences of its actions and not get a second bite from the retirement plan. But that is not a QDRO question.