Top Heavy

[Lou S.]

How is a QDRO distribution to an alternate payeee reflected in the top heavy testing?

Is this considered a distribution to the participants account or alternate payee's?

Is it considered an in-service subject to the 5-year look back, or like a distribution in the current year to a "terminated participant" subject to 1-year look back, or is it ignored altogether?

Is there anything in section 416 Q&A that I'm missing on this, I didn't see anything directly on point.

[PensionPro]

It is considered an in-service distribution subject to the 5-year look back. I don't know if there is anything specific in the 416 regs, but this is based on IRS comments at ASPPA conferences.

[Guest Sieve]

There is nothing about QDROs, I believe, in the TH regs. Of course, there is no regs' discussion of whether a QDRO is subject to the one-year or 5-year lookback because, when the regs were issued, all distributions (at employment termination or in-service) were subject to a 5-year lookback.

[Belgarath]

FWIW, here's how we handle it:

Payments under a QDRO are not specifically addressed in the regulations. We take the approach that the alternate payee is considered a "beneficiary" under the plan for these purposes. As such, these distributions should be considered in making the top heavy determination. Since the top heavy changes under EGTRRA retained the 5 year lookback period for distributions OTHER than severance from employment, death, disability, or termination of the plan, the 5 year lookback period would apply to distributions pursuant to a QDRO.