Cancellation of QDRO

[J. Bringhurst]

Has anyone had to "cancel" a separate interest QDRO once payments had commenced to the AP? I assume that you can request an amended order that supersedes the prior QDRO with respect to future amounts payable, but I'm just not sure how you can return payment to the participant. The parties would have to make up outside the Plan the amount of any previously distributed benefits, so I'm really just worried here about prospective payments...thoughts?

[QDROphile]

You can do it wih a plan amendment that provides a special benefit to the participant, so you might not be able to do it for a highly compensated particpant

[Guest cac1134]

you can only deal prosepectively under the plan. as far as going forward, the AP rights are only as a result of the qualified court order. an order vacating those rights would be followed by the plan. if the plan receives a certified copy of an order vacating the prior qdro as entered in court, it must stop payments to the AP.

[J. Bringhurst]

You can do it wih a plan amendment that provides a special benefit to the participant, so you might not be able to do it for a highly compensated particpant

Thank you.

[capitalqdro]

You can seek to have the QDRO vacated and benefit payments revert back to the participant. As said above, changes are prospective only. Refunds would have to come straight from the alternate payee.

[Effen]

My first reaction is the plan should not permit this. Once the benefit has commenced, it seems like it should be a done deal. From the plan's perspective, I would be worried about adverse selection issues and would counsel them not to do this.

Oops - sorry, just realized this was an old post that capitalqdro resurrected for a shameless company plug that I deleted. Either way, I still would argue this should not be permitted.

[Mike Preston]

I agree with Effen's technical analysis and point.

I disagree with his moderator action. A message should generally not be subject to editing. If it runs afoul of our collective sense of decorum it should be obliterated.

[My 2 cents]

For what it's worth, put me in the camp of those saying that any changes would be prospective only, and the plan would have no reason to get involved in getting amounts already paid to the AP returned to the participant. If the plan received a valid court order that met the requirements to be treated as a QDRO and paid benefits accordingly, and then a valid court order is issued making the prior court order null and void, the most that could be required of the plan is to make all future payments to the participant. I am having some trouble seeing how there would be adverse selection issues, unless the participant and the AP have been gaming the system. Even then, the valid court order would have to be followed, wouldn't it?

[QDROphile]

I think this discussion is going on flights of imagination and misunderstanding, so I am going to reform the question so we can at least be posting about the same thing. Perhaps I misunderstood the original post, but here is the reformed post:

Alternate payee is awarded a portion of benefits under a defined benefit plan. The AP starts benefits in the form of a life annuity. Later, a domestic relations order is received that purports to cancel the AP's interest and restore that interest to the participant. Can the order be a QDRO and how can it be implemented?

Response: Assuming the plan does not have the terms as described below for reformation of benefits, the order would not be a QDRO and would be given no effect. It requires the plan to do something that the plan is not designed to do -- reform a benefit that is in pay status.

The order could be a QDRO if the plan provided (or was amended to provide) that after an annuity benefit started, the benefit could be reformed so the remaining actuarial value of the benefit could be paid in a form other than the form orginally elected at the start of benefits (such as restoring it to the participant and paying in the form of benefit elected by the participant). That would be a terrible idea and would allow adverse selection. All it would take is a post-starting-date diagnosis. The benefit would be reformed to shift benefits away from the recipient that has a newly-discovered shorter life expectancy, to the actuarial disavantage of the plan. The reformation (the cancellation of the QDRO) would apply only prospectively. Amounts paid would reduce the value of the benefit and plan would have nothing to do with prior payments. The court could order the AP to pay amounts to the participant, but that would be independent of the plan.

And I now question my original response that if the sponsor was ill-advised, the plan could be amended to set it up to qualify the order. That amendment might violate section 411(d)(6) by ultimately cutting back the AP's benefit. I vaguely recall some authority that beneficiaries are protected.