Child Support Arrearages From 401k, Deceased Participant

[cwallace]

I know that a QDRO can be used to collect back child support from a participant's 401k account. The participant is now deceased and the ex-spouse does not currently have a QDRO for the back child support.  Another person (none of the children) is named as the beneficiary under the 401k.  Can the ex go get the QDRO now, post death, and apply it to the 401k plan and require us to hold off paying out to the beneficiary while she goes and tries to get one?   

[QDROphile]

It depends first on state domestic relations law.  One must have a DRO before getting a QDRO.  Child support could be encompassed in a state’s domestic relations law.  There is also another approach that allows states to enforce child support through orders, again based on state law.  There have been posts on the subject. I forget the cite to the US Code. Search for posts by Mbozek.

How the law treats post-death enforcement will be an issue and will depend on applicable  state law and rule of the child support agency.

Beyond state law, you have a timing issue.  The plan is going to pay the designated beneficiary unless timely stopped. A DRO will suspend a pending distribution, at least until qualification can be resolved.  Nothing in QDRO law prevents a post-death order.

[Larry Starr]

3 hours ago, cwallace said:

I know that a QDRO can be used to collect back child support from a participant's 401k account. The participant is now deceased and the ex-spouse does not currently have a QDRO for the back child support.  Another person (none of the children) is named as the beneficiary under the 401k.  Can the ex go get the QDRO now, post death, and apply it to the 401k plan and require us to hold off paying out to the beneficiary while she goes and tries to get one?   

I think the specific answer to the question (which QDROphile also suggests, I believe) is NO.  The plan does not have to hold off paying out the beneficiary UNLESS there is an order that they are adjudicating.  She has no order; she may not get one; and the beneficiary has ERISA rights which can be enforced.  If she can move quickly (BTW, these things NEVER move quickly!), then maybe she has a shot.  My guess is she is already SOL. 

[QDROphile]

Thanks to Larry Starr for focusing on the question.  I see now that you are asking from the perspective of the plan, and I am refining my response accordingly.

As Larry Starr confirmed, the plan follows its terms and pays the designated beneficiary in regular course (no special speed up or slow down -- just follow usual procedure; well, maybe speed up :-)) unless the plan receives a DRO before the distribution.  If the plan receives a DRO then distribution to the beneficiary is suspended while the plan follows the rules of IRC section 414(p), and determines if the DRO is qualified or not.  Then proceed accordingly and there is now quite a bit of law about what that means.

Make sure you understand what a DRO is.  It does not have to say "I want to be a QDRO" on it.  For example, the child support order could be a DRO and could be submitted (knowing that it will not qualify) to delay while the plan processes according to legal requirements and plan procedures, including notices, and the proponent tries to get a "real" DRO that could qualify.

Now for one of my favorite subjects.  The Department of Labor does not understand  the law governing QDROS and is of the mistaken belief that if the plan knows that someone is trying to get a DRO to submit to the plan, the plan has to hold any distributions in abeyance to the extent the would-be QDRO would succeed in capturing  some or all of the balance of the account.  If the plan is ill-advised, it might include the DOL's faulty position in its terms or written QDRO procedures.  If the plan is unfortunate enough to have done this, then the plan has to follow its own terms and procedures.  Result:  if the plan reasonably knows that someone is trying to submit a DRO, it has to delay distribution to see about it.  What is "knows" and how long to wait?  The plan makes its own bed by introducing the bad concept into its terms or procedures, so the terms or procedures should answer all the questions -- HA!