Assignement of Benefit in a DBP

[Gary]

A husband and wife are the only employees of their company and they have a DBP.

They get a divorce and the wife terminates from company.

I inform client of the wife's vested pension rights under the plan.

The client (husband) says nothing is owed to wife since she has given up all rights under plan in divorce settlement.

I have not responded to client on this matter yet.

As far as I can see the only way the benefit could be assigned (assuming no civil judgement or settlement, crime, etc.) is if a QDRO was prepared and certified by the judge and all parties (i.e. husband and wife).

Are there any other views on this matter?

Meaning, the client should contain in his possession a valid QDRO that assigns the former spouse's (i.e. wife) entire pension.

Thanks.

[david rigby]

The client (husband) says nothing is owed to wife since she has given up all rights under plan in divorce settlement.

Perhaps you can draw his attention to the plan provision that describe (1) vesting, and (2) QDROs.

[SoCalActuary]

There are other issues as well.

The benefit she earned - where does it go?

Does it create a forfeiture and no benefit, e.g., a disclaimer of all benefits?

Does it create a transfer of value to husband, as in a 414(k) account?

Did she also have any beneficiaries under the plan besides the husband? Do they still have a death benefit?

Get the QDRO for the sake of the plan's qualified status!

[Gary]

Yes, I hear you.

If there even is a QDRO. The client may just think a handshake and verbal agreement is sufficient.

Regarding where the benefits go?

My initial reaction is that the husband gets his benefit, which will be at the 415 limit.

And the former spouse's benefit may go to the husband valued as a frozen accrued benefit entirely assigned to him, just like it might be if the wife worked for another company like IBM. Of course this needs to be indicated in the QDRO.

The spouse was fully vested at termination.

[Guest Kabert]

A divorce settlement agreement can qualify as a QDRO, as long as it meets the QDRO content requirements. If there's no QDRO here, then I'd want to ask some more questions of your client and his divorce lawyer. Can't just give up pension entitlements, whether as participant or as spouse (including a former spouse).... see 401(a)(13) regulations.

[Gary]

I didn't realize that a divorce settlement can qualify as a QDRO.

Playing devil's advocate: In a one participant plan (husband and wife only) can benefits be assigned since Plan is not an ERISA plan (i.e. no employees)?

That is, since it is a one participant plan can benefits be assigned informally, without having to follow QDRO technicalities. etc.?

I have no knowledge of such a liberty, but wondered if anyone had come across anything re: a one participant plan.

Thanks.

[SoCalActuary]

IF (false premise) THEN (anything you want it to be)

works in symbolic logic, but it starts with something that is not true in the first place.

You don't have a one-person plan.

[Mike Preston]

But even if you did, you couldn't.

[Gary]

Thnk you, though a husband and wife pplan where they wholly own the business is a one participant plan.

Per instructions to Form 5500EZ.