Allocation of QDRO payout among money sources

[Guest 4:15 Limit]

This is probably a stupid question but I've never come across this before.

We have a QDRO that calls for a 50% distribution to the alternate payee as of a specific date, adjusted for gains / losses. We've done the calcualtion and the attorney confirmed our numbers. But from what money type(s) do we withdraw the funds from? The participant has a 401(k) account, a match account and a profit sharing account. Participant is not 59 1/2. Do we allocate the withdrawal amount pro-rata across all money types or what do we do?

Any input would be greatly appreciated.

Thanks!

[david rigby]

... or do you reject the DRO as not meeting the requirements of a QDRO?

[Guest 4:15 Limit]

Their attorney signed off on it and we've been instructed by both the attorney and the client to move forward. So even though the (Q)DRO doesn't specify from what money type(s) to withdraw the payment from, what do you think is reasonable?

[TPAMan]

Unless you want to be the one who decides which sources the QDRO is to be funded from, I would suggest a pro-rata allocation. As long as the Plan Doc provides for "early" distributions for QDROs, there should be no source issues.

[Guest 4:15 Limit]

Thank you!

[mbozek]

Their attorney signed off on it and we've been instructed by both the attorney and the client to move forward. So even though the (Q)DRO doesn't specify from what money type(s) to withdraw the payment from, what do you think is reasonable?

Just because the attorney and client signed off doesnt mean the plan has to accept it. I would get a waiver from the participant that authorizes a pro rata distribution. Given how the stock market is behaving the last few days the plan doesnt need to be at rsik

[QDROphile]

The Plan's written QDRO procedures should have a default provision on the subject. This is a common situation.

[Guest Sieve]

I think the plan administrator is permitted some leeway in interpretation, and I would not reject a QDRO simply because it did not indicate the sources from which the payment would be made (since I do not see where the statute is violated by doing so). However, in the letter to the PA (cc to each attorney) approving the QDRO, I might indicate that the allocation of the payment would be spread pro-rata among all accounts without some language in the QDRO to the contrary, and see what reaction there is from either side.