Alternate Payee required to be dependent child

[Guest qdroatty]

In a separate interest QDRO where a plan permits the Alternate Payee to designate a contingent beneficiary to receive amounts payable to the AP in the event the AP dies before receiving benefits, must a contingent beneficiary who is a child of the Participant necessarily be a dependent child or could that child be an adult child of the Participant?

I am assuming for purposes of this question that the contingent beneficiary will or must be in the relationship of an alternate payee to the Participant.

Thanks for any input.

[QDROphile]

No one knows for sure, or if they do, they are either not in a postion of authority or have not chosen to say in an authoritative manner.

I think the plan administrator can decide either way. If the limited is view is taken, it would look to the language in the statute about child support as the basis for the exception to the rule, and will conclude that only a minor or dependent can be an alternate payee. If the expansive view is taken, then the operative question is, "Who cares?"

Either way, be careful about the special tax rules and the need to deal with different withholding rules. I recommend that the withholding be required to be specified in the order to avoid ambiguity about what the AP is really supposed to receive -- an amount that is net of withholding or not. The main source of trouble is that the participant can elect the withholding amount if not confined by the terms of the order.

[Guest mjb]

Why would the plan administrator care? They will pay if the DRO is issued by a court.

[PensionPro]

The language of ERISA and the Code state that the alternate payee can only be "any spouse, former spouse, child, or other dependent of a participant" (IRC § 414(p)(8), ERISA § 206(d)(3)(K)), but to the best of my knowledge the statutes do not specify who can be a contingent beneficiary of an alternate payee.

[Guest Sieve]

No limit on who can be beneficiary of alternate payee--unless QDRO requires it (or, I guess, unless plan limits it).

[QDROphile]

Sorry. My response was geared only to the issues that arise if one desires to name children as alternate payees, contingent or otherwise. I agree with the other posts that the plan can be designed to allow an alternate payee to designate a beneficiary without concern for identity.