Which funds to be distributed from QDRO

[DCRet24]

I have a QDRO that pays a specific dollar amount plus gain/loss through distribution date. Can the participant specify the fund he wants the alternate payee to be paid from or does it have to be pro-rated across all funds in his account?

[david rigby]

Similar discussion:  

 

[Peter Gulia]

DCRet24, if the participant's account has no illiquid or exotic asset and everything is mainstream investment fund shares or units, and all are readily redeemable (and available for purchase), does it matter how investments are redeemed to raise money or an amount to pay or segregate the alternate payee's portion?

After the alternate payee's portion is paid or segregated, could the participant, under the plan's investment and service arrangements, reset his account to whatever investment mix he prefers?

[fmsinc]

I have had many 401(k) Plan Administrators tell me that the amount transferred to the Alternate Payee must be taken proportionally, that is, on a prorata basis, from all investment options, accounts, sub-accounts, funds and investment sources in the Participant’s account. 

The account could contain all or any of the following accounts: mutual fund accounts of varying risk, rollover accounts, pre-tax accounts, after-tax accounts, company stocks, cash accounts, matching employer contribution accounts, unallocated accounts, and loan repayment accounts with different tax consequences.

Talk to the Plan Administrator and find out their policy on this issue. 

[QDROphile]

Keep in mind that such a policy is simply a feature of the service provider's product, not a legal mandate.  I maintain that such policies create risk of violation of the law, but good luck getting a change.  It would help protect the plan if such a policy were reflected in the plan's written QDRO procedures.  But good luck on getting really helpful QDRO procedures.  You won't get them from the big investment/service providers.