Most reasonable QDRO interpretation

[Guest K.C.]

A QDRO for a DC plan states that the alternate payee shall receive 50% of the marital share to which the participant is entitled to under the plan. The marital share shall be calculated by multiplying the monthly gross annuity, lump sum, death benefits or other payments by a fraction, the numerator of which is 9.630 and the denominator is the "total number of years" of the participant's participation in the Plan.

The plan's normal form of payment is a 50% QJSA. The participant has remarried. Assume the participant becomes eligible to take a distribution on January 31, 2009 with 19 years and 31 days of participation in the plan, and begins receiving a monthly annuity of $1200. What is the most reasonable interpretation of the award to be made to the alternate payee?

$1200 x 9.630/19 years of participation (is the most reasonable interpretation to disregardthe 31 days of participation since the QDRO states that only "total number of years" are considered?) = $608.21

$608.21 x 50% = $304.11 monthly payment to the alternate payee for the life of the participant (QDRO does not provide for survivor benefits for the alternate payee, other than stating that the "death benefits" will be multiplied by the coverture fraction above)

Is my thinking above correct?

Thanks for any help you can give here.

[QDROphile]

The order should not have been qualified. That sort of formulation should never be allowed under the circumstnaces and your dilemma shows why. Go back and nix the order.

[GMK]

At first blush, if the numerator (9.630) represents the total number of years that they were married to 3 decimal places (probably while the participant was a participant), then the denominator probably ought to be 19.085.

Alternately, if the 31 days is used in determining the amount of the annuity, then also use it in determining the fraction. If the 31 days is disregarded for the annuity, disregard it for the fraction.

In conclusion, QDROphile is correct.

[Guest mjb]

The order should not have been qualified. That sort of formulation should never be allowed under the circumstnaces and your dilemma shows why. Go back and nix the order.

I agree with Q. This order should be rejected because it does not properly define the benefits to be paid to the AP.

[GMK]

K. C. - See also J. Simmons' reply here:

http://benefitslink.com/boards/index.php?s...c=39977&hl=

[Guest K.C.]

Thank you all for your responses. GMK, thanks especially for providing that link. That's the approach I'm leaning towards.

I've already had a conversation with the client where I've suggested that they undo the earlier approval of the order as a QDRO. That isn't something that the client is willing to do. Instead, they've asked how to calculate the award to the alternate payee since, understandably, they've never had to calculate an award under the plan in this manner.

[GMK]

K.C. - You're welcome, of course. I was just lucky. That thread was running at the same time as yours.

As a suggestion, click on the View New Posts link at the top of the page. It's all interesting reading, but from a practical point, you get to see the list of topic titles under discussion. Titles are listed under one subject area, but the discussions often provide useful information related to other subject areas.

It's no guarantee that you'll get what you want, but sometimes you get what you need.

[QDROphile]

What is the client going to do the next time it gets a similarly improper order? Can't turn that one down if you do this one. Plus, I would love to see the QDRO Procedures amendment that emerges from this.

[Guest K.C.]

This was an order that was approved back in 2003, prior to the plan administrator becoming a client of ours. Now that they are a client, they have QDRO Procedures that we prepared and we also review draft orders on the client's behalf before the orders are approved as QDROs. This, unfortunately, was a time when the client did not have anyone knowledgeable performing this service for them and they approved the orders in house.

With regard to this particular order, the participant has now become eligible for a distribution, which is why the client has asked for help interpreting how the award to the alternate payee should be calculated.