Distribution Processed, Plan Sponsor Notified of Divorce

[TPA Bob]

We administered a plan that terminated this year with final distributions processed in September 2010. We received a letter this week from a participant's attorney returning the check (a net check after tax withholding) explaining the participant is currently going through a divorce and to reinstate the balance. We contacted the investment platform and they will not do anything as the account has been closed. We contacted the plan sponsor and they were not aware of the divorce proceedings until after the distribution was processed.

I feel like we need to return the check to the attorney and say too bad, consider this disposition as part of the total disposition of the parties, but am curious if someone might think differently.

All responses greatly appreciated.

[rcline46]

Return the check to the attorney/participant. THere is NO PLAN anymore. The assets are now part of the estate for division, not part of a plan.

[mbozek]

We administered a plan that terminated this year with final distributions processed in September 2010. We received a letter this week from a participant's attorney returning the check (a net check after tax withholding) explaining the participant is currently going through a divorce and to reinstate the balance. We contacted the investment platform and they will not do anything as the account has been closed. We contacted the plan sponsor and they were not aware of the divorce proceedings until after the distribution was processed.

I feel like we need to return the check to the attorney and say too bad, consider this disposition as part of the total disposition of the parties, but am curious if someone might think differently.

All responses greatly appreciated.

Since there has been a distribution to the participant no further action can be taken by the plan. Return the check to the attorney with the comment that it should be deposited in the participant's IRA if less than 60 days has elapsed. Otherwise it is a taxable distribution which should be deposited in the participant's bank account. In any event the distribution is part of the maritial estate subject to division by the state court handling the divorce since the funds are no longer a plan asset. There is no reason for the plan administrator or the employer to waste time or resources on this matter.