Guest sborrow Posted July 19, 1999 Posted July 19, 1999 A client has a 401(k) plan that has permitted distributions under a QDRO to be made before the earliest retirement age. (The plan does not contain a provision permitting alternate payees to receive QDRO distributions before earliest retirement age). Does anyone have any suggested corrections other than to amend the plan to permit pre-earliest retirement age distributions going forward?
KIP KRAUS Posted July 21, 1999 Posted July 21, 1999 sborrow: We have taken the position that an alternate payee,for whom 401(k) funds must be segregated, are being put into an account for a non-active plan participant. Therefore, we allow the alternate payee to take a distribution on the same basis as any employee who terminates employment. We, of course incourage the distribution because we don't want the additional admin. expense for non-actives. Our plans do not specifically allow for distributions to alternate payees, but we have been advised by ERISA legal council to amend the plans to do so. QDROs for DB plans of course are totally different.
QDROphile Posted July 22, 1999 Posted July 22, 1999 Check Rev Proc 98-22. In Walk-in CAP you may be allowed to amend the plan retroactively to conform to prior administrative practice. You might have some luck in VCR, but not with the conforming amendment. The VCR correction would be to write a letter to the alternate payees and request that they return the contribution, perhaps warning them that the Form 1099 will report the distribution as nonrollable, but not pursuing the return. Call the VCR people first to get some guidance. A plan must have express provisions if it wishes to permit alternate payees to get distributions before the former spouse participant is eligible.
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