Hardship Distribution and DIVORCE

[52626]

Plan Sponsor is aware the participant is in the process of a divorce.

The participant needs money to pay medical expenses not covered by insurance. The plan allows for hardship. this is a 401(k) Profit Sharing Plan

Since there is a pending divorce, is there a "risk" if the Plan Sponsor distribures the funds due to the hardship?

What happens if the QDRO amount is more than what is in the account due to the hardship payment?

[ETA Consulting LLC]

Has the QDRO been received and in the process of being reviewed? If not, then on what authority would there be to deny a distribution the participant is entitled to under the written terms of the plan? There is 'very limited' room to actually delay such distributions when a QDRO is 'actually received'. The plan's QDRO procedures should provide the details.

Good Luck!

[52626]

the Divorce is not finalized and neither is the QDRO. So even though everyone knows about the divorce, the plan allows for hardship and the participant is entitled to receive the funds.

[masteff]

http://www.dol.gov/ebsa/publications/qdros.html

http://benefitslink.com/boards/index.php?/topic/21995-18-month-disbursement-restrictionsegregation-period/

You need to read up more on QDRO procedures to determine at what point you should be enforcing the 18-month segregation period on the participant's account. A number of factors you need to consider. For example, have you received a draft copy for preapproval?

[QDROphile]

The plan's written QDRO procedures should address what triggers restriction of a particpant's account. If the trigger is other than receipt of a domestic relations order (not a draft order), the procedures should be very specifc and detailed about what the trigger will be and what will happen and for how long. You may wish to consider that the Department of Labor informal postion is contrary to the published federal court decision on the subject.