Can Plan accept rollover of funds previously distributed for QDRO?

[Guest [Pat M]]

In 1999, the court and Plan approved a QDRO. Alternate Payee rolled over the award to a conduit IRA. Now the plan is being asked to take back the funds as a rollover into the PT's account - the original QDRO apparently did not properly divide all assets and the attorneys want it reversed. Tax avoidance is key. How can this be done?

[Guest]

This appears to be a local court issue to undue the QDRO. However, it seems that since it has been accepted by the Plan as appropriate, that such unravelling would not be permitted under audit by the IRS.

In some fashion, the local court would be ordering that the original QDRO was invalid from its inception. That could subject the plan to difficulties for violating the anti-alienation rules in general.

Better solution, might be for spouse to transfer to participant IRA to IRA.

[pjkoehler]

Unless there are facts that would undermine the plan administrator's prior determination that the court order was a QDRO, then the plan has discharged its liability to the Alternate Payee. The Plan is not in a position to remedy the QDRO's failure to properly divide marital property. That's a court function and any court order that would require the Plan to take back the previous distribution received by the Alternate Payee and rolled over (plus interest earnings while held in the IRA, I guess) would not be a QDRO for a variety of reasons. Therefore, it would be subject to ERISA preemption.

The proper procedure here would be for the Participant to petition the court to establish a constructive trust with respect to the assets held in the Alternate Payee's conduit IRA, subject to the court's disposition of the issues being raised. Ultimately, the court can modify its prior judgment and allocate some or all of the conduit IRA assets to the participant as a "transfer incident to divorce" pursuant to Code Sec. 408(d)(6), without undue adverse tax consequences to either party. The IRA custodian holds the property at issue in the dispute, not the plan. Accordingly, the Plan should be completely left out of this process, barring any new revelations that would lead the plan administrator to reverse its determination about the prior order's QDRO status.

[This message has been edited by PJK (edited 06-09-2000).]

[Guest [Pat M]]

Thanks!

[This message has been edited by [Pat M] (edited 06-09-2000).]