Describing amount to paid pursuant to QDRO

[mariemonroe]

I am drafting a QDRO based on a separation agreement that describes the amount to be distributed to the alternate payee (Wife) as follows: Wife's IRA balance as of Date X is added to Husband's plan balance as of date X. The sum is divided by 2. Half of the combined balance is further decreased by various debts of Wife and finally by one-half of Wife's IRA balance as of date X. The description of how the amount is to be determined is actually pretty clear.

My question is: are plan administrators comfortable having to determine the QDRO amount by reference to a plan other than the plan they administer? Is this unusual? How have other handled this? I would rather get it taken care of before submitting the draft QDRO to the plan administrator.

Thanks.

[J Simmons]

An order must, among other things, clearly specify the amount or percentage of the participant's benefits to be paid by the plan to each alternate payee, or the manner in which such amount or percentage is to be determined. A formulation that requires the plan administrator find out and use extraneous information seems to go beyond that. It almost looks like the QDRO drafter is trying to push off onto the plan administrator some leg work that the QDRO draft ought to be doing.

[david rigby]

I agree with JSimmons. If I were reviewing that DRO, my recommendation to the PA would be to reject it.

The gaol can be accomplished by having the parties do the arithmetic, and put the result in the DRO.

[jevd]

IRA's are not governed by QDRO's although some IRA trustees may accept them. They are governed under IRC 408(d)(6) and the benefit to the ex-spouse (Alt Payee) is a trustee transfer to an IRA in the name of the receiving spouse:

408(d)(6) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE. --The transfer of an individual's interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse.

[Guest Sieve]

As stated above, the only QDRO that makes sense here is one that specifies the exact dollar amount to be set aside for the alternate payee. Anything else, under the circumstances, just won't pass QDRO muster for the reasons stated by JSimmons.

[jevd]

Although some IRA trustees will acknowledge a QDRO, many will not. They will simply send a form that requires both parties to agree to the division of the IRA and require that the receiving spouse give instructions where the IRA account in their name is held and how it is to be transferred. Many also require the receiving trustee/custodian to send an acceptance letter acknowledging that the funds will be deposited in an IRA account in the name of the receiving spouse.

It would be advisable to check with the account owner's IRA trustee/custodian to see what they require before spending a lot of time and effort on the QDRO.

[david rigby]

Answers above by jevd seem to be predicated on the assumption that the original post was concerned with a QDRO for an IRA. I read the OP differently, but who knows. Perhaps the poster could elaborate.

Or just ignore the whole thing?

[Guest Sieve]

I think you were reading it correctly, david rigby.

[mariemonroe]

The QDRO applies to a 401(k) Plan.

Thanks for the advice everyone.

I think I will just do the math myself and put a nice dollar amount in the QDRO instead of a long, drawn-out formula.

[jevd]

Just re-read OP. I did misread.