QDRO Mistakenly Accepted

[BTG]

Earlier this week, I came across a QDRO that was approved, but shouldn't have been. It was a shared payment order, but gave the AP an election to come into pay status anytime after the P's early retirement date. On our advice, letters were sent to the parties approving the order as a QDRO back in 2004. We have six years before the P hits early retirement age.

Should we tell the parties to go back to court to revise the order? Does the plan or our firm have any liability exposure for getting it wrong the first time? Any thoughts on the best course of action would be appreciated. Thanks.

[QDROphile]

The plan will be disqualified if benefits are assigned and paid other than in accordance with the terms of a qualified domestic relations order. In this rather ticklish situation, professional help would be a good idea. You may have several ways to skin the cat.

[Mike Preston]

I would treat it as a separate interest QDRO if the option to begin prior to p's retirement is elected. In other words, the fact that the QDRO appears to have language describing it as a shared payment QDRO is overridden by the fact that one of the options provided to the AP (and approved by the plan) is a separate interest.

To cover your bases, you might consider, after folowing QDROPHILE's sage advice, writing a clarifying letter to the parties showing them what happens if the AP elects to commence benefits prior to the time that the Participant does so. Just make sure that the P is no worse off when he retires if the AP elects early commencement than he/she would have been had the AP waited and received a shared payment. This, it seems to me, is what would normally happen, so you should be able to at least see the finish line through the fog.

Good luck.