Two questions regarding alternate payee distribution without proper QDRO

[401(j)]

I have a client who made a 2014 distribution to a participant's ex-wife without a proper QDRO. The divorce decree called for the distribution but it did not contain the required language for a QDRO; they are now in the process of having the a QDRO prepared.

Question 1: To correct the situation, do the funds have to be repaid to the Plan and distributed again after the QDRO, or can it be corrected by not having a repayment but merely having the QDRO prepared after the fact, acknowledging that the distributed amount was correct?

Question 2: Should a form 1099-R be issued by the Plan for 2014, and if so, who should be shown as the recipient on the 1099-R -- the participant or the ex-wife who received the funds?

Thanks in advance for any help.

[ETA Consulting LLC]

Technically, you have a payment from the plan to someone who is not even a participant (and not entitled to any payment from the plan). You have a qualification issue that should be corrected under EPCRS (either SCP, if available, or VCP).

Good Luck!

[Lou S.]

I would think if you could perfect the QDRO quickly you should be able to self correct and issue 1099-Rs like you had a valid QDRO all along. If you can't as ETA mentions, the Plan has problems.

[david rigby]

I'll bet there is more to it.

- is the participant an HCE?

- an employee who had some authority to direct the payment to ex-wife?