QDRO Procedures for Non-ERISA Plan

[kshawbenefits]

Client is a religious organization with both 401(a) and 403(b) plans. Participant terminated employment and requested distribution- the distribution was delayed because of an incorrect address.

During the delay period (i.e. after the distribution would have otherwise been made but before it actually was), the plan administrator received a consent order for a pending divorce. Neither the sponsor nor the administrator (which is a MAJOR provider) seems to have any written QDRO procedures for the plans. Just a practice where the administrator generally receives a DRO and the plan administrator approves it. 

Any thoughts on whether the plans are satisfying 414(p)(6)(B)? Or whether the distribution should still be made? Given the financial situation laid out in the consent order, there is a chance that the spouse would get the full benefit available under one or both of the plans. 

[JamesK]

Code sections 401(a)(13) and 414(p) do not generally apply to "church plans" unless they have elected coverage.  See the last paragraph of section 401(a), and sections 410(d) and 411(e)(1).

That said, if the QDRO requirements do not apply to the plan but it allows for QDROs, I would advise the client to have such a policy simply to ensure that a process is being followed and all participants are treated the same in that respect.  I would want someone who is knowledgeable about the vagaries of DROs to be doing the review - at least with more complex orders.

If Code section 414{p) does apply to this plan, then clearly they need to adopt a policy to be in compliance with the Code and ERISA.

[kshawbenefits]

18 minutes ago, JamesK said:

Code sections 401(a)(13) and 414(p) do not generally apply to "church plans" unless they have elected coverage.  See the last paragraph of section 401(a), and sections 410(d) and 411(e)(1).

That said, if the QDRO requirements do not apply to the plan but it allows for QDROs, I would advise the client to have such a policy simply to ensure that a process is being followed and all participants are treated the same in that respect.  I would want someone who is knowledgeable about the vagaries of DROs to be doing the review - at least with more complex orders.

If Code section 414{p) does apply to this plan, then clearly they need to adopt a policy to be in compliance with the Code and ERISA.

I am assuming that when you say "elect" you mean that the plan documents include statements that they will comply/be subject to 401(a)(13), 411 and 414(p)? Is there some other formal election? I am not aware of any. 

[PensionPro]

Or does the plan document provide that benefits are unassignable?

[JamesK]

1 hour ago, kshawbenefits said:

I am assuming that when you say "elect" you mean that the plan documents include statements that they will comply/be subject to 401(a)(13), 411 and 414(p)? Is there some other formal election? I am not aware of any. 

I was referring to the election under Code section 410(d) to have the plan treated as though it were not a church plan.  That election would make those other requirements applicable to a church plan.

[QDROphile]

If ERISA applies, ERISA requires written QDRO procedures and requires that the SPD (also required by ERISA)  either 1) summarize the QDRO procedures, or 2) state that a copy will be provided on request (and without charge, I think). I recommend #2.  The 403(b) providers are such bad citizens that we got the extensive IRS regulations under 403(b) to attempt to achieve legal compliance when the 403(b) providers abdicated.  The 403(b) regulations made the DOL  prevaricate (or maybe even lie) about the definition of ERISA plans, making a big mess for everyone.  So do not expect the 403(b) providers to be stepping up to compliance or to be truly helpful.

[PensionPro]

33 minutes ago, QDROphile said:

If ERISA applies, ERISA requires written QDRO procedures and requires that the SPD (also required by ERISA)  either 1) summarize the QDRO procedures, or 2) state that a copy will be provided on request (and without charge, I think). I recommend #2.  The 403(b) providers are such bad citizens that we got the extensive IRS regulations under 403(b) to attempt to achieve legal compliance when the 403(b) providers abdicated.  The 403(b) regulations made the DOL  prevaricate (or maybe even lie) about the definition of ERISA plans, making a big mess for everyone.  So do not expect the 403(b) providers to be stepping up to compliance or to be truly helpful.

op title indicates non-erisa plan

[QDROphile]

I was taking a track (the ERISA track) from the confusion generated by the references to election.  If the other track is the true track, no one needs to follow the ERISA track.

[david rigby]

At the risk of stating the obvious, if there is a plan provision than incorporates the QDRO requirements, then the ERISA election is (probably) not relevant.

[Patricia Neal Jensen]

"Election" in this context is a written statement that the church plan elects ERISA.  It cannot be accidental.  I cannot imagine why a church would want to do this.

[Elizabeth G]

If the plan is not subject to ERISA, then there would be no ERISA preemption of state law. It sounds like you are dealing with whatever the relevant plan terms say in light of what state law requires. Has the client's counsel been consulted?