Jump to content

Alternate Payee splits award with the Participant?


Guest QDROsleuth

Recommended Posts

Guest QDROsleuth

I have a recently divorced employee who wants to 'liquidate' her account in our plan by awarding 100% to the ex. They intend to split the lump sum and go their separate ways.

I cannot find any legal precedance to refuse the order. The document meets our terms, and just states that the ex gets everything. However, I know that the employee is essentially getting an early retirement distribution by filtering it through her ex.

Any thoughts?

Link to comment
Share on other sites

Likely you cannot "refuse the order". (BTW, does the plan have written QDRO procedures?)

Search this message board for the 2 or 3 discussions on the court case involving Continental Airlines.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

You cannot refuse the order if it conforms to plan rules. Additionally it is the Participant's money and the fact that he or her may have found a way to avoid the early distribution penalty is really no skin off your nose. However, I question whether either party can avoid the penalty anyway since the Alternate Payee effectively becomes a Participant after the division and should be bound by the same rules as the Participant, especially in regards to the early distribution. You did not provide their age so it is not possible to tell if age is a factor.

If they take a distribution and roll it over into an IRA or other retirement vehicle, then no harm or foul, but aside from the fact that the plan should be treating the Alternate Payee the same as they treat a Participant, both the P and AP have to deal with the IRS and will have to account to for the distribution.

Link to comment
Share on other sites

There was a case a few years ago where a number of participants were getting divorces in order to obtain QDROs then getting remarried. The court ruled that whether or not the divorce was a sham was not the plan's concern. I would imagine this would be treated the same.

Link to comment
Share on other sites

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...