What legal authority allows for an immediate disbursement?

[Wacko in Winnebago]

I read a bunch of cases a while back, but don’t recall seeing this addressed:

What is the legal authority that allows an Alternate Payee to immediately take a full disbursement of their portion of the participant's benefit assigned to them through a QDRO, when the participant’s benefit is not in pay status, the participant has not attained the earliest retirement age, and the participant does not otherwise qualify to take a withdrawal from the plan pursuant to the plan's rules. 
 

[Effen]

Defined benefit or defined contribution?

For a DB plan, I would say there isn't one.

[CuseFan]

An immediate lump sum to the A/P of a QDRO in such instance is only allowable if (1) the QDRO calls for it and (2) the plan allows for it. DB plan documents can allow for QDRO payouts of any amount at any time (but lump sums would be subject to any 436 or top 25 HCE restrictions), regardless of whether the participant is eligible for a distribution. Our pre-approved plans have that as a checkbox option.

[CuseFan]

Make sure you are checking the correct section(s) of the plan document or AA.

[Wacko in Winnebago]

Sorry, it's a defined contribution (401k) plan. 

[ESOP Guy]

If you have a pdf of the plan document, AA and base document, I would search the words, "Alternate Payee".   Most documents make it pretty clear that the AP can be paid immediately if the QDRO calls for it.   

I guess I have never had anyone question what part of the law says you can write a document like that.  

[Peter Gulia]

For an ERISA-governed individual-account retirement plan, when an alternate payee may get a QDRO distribution goes like this:

A plan must allow a QDRO distribution if the participant is entitled to a distribution under the plan.

A plan must allow a QDRO distribution on the later of the participant’s age 50 or the earliest date on which the participant could begin receiving benefits under the plan if the participant separated from service.

ERISA § 206(d)(3)(E), 29 U.S.C. § 1056(d)(3) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1056%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1056)&f=treesort&edition=prelim&num=0&jumpTo=true

A plan may provide an alternate payee’s QDRO distribution before the plan provides a distribution to the participant.

26 C.F.R. § 1.401(a)-13(g)(3); https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)-13#p-1.401(a)-13(g)(3)

Whether an individual-account plan provides a QDRO distribution before the participant’s earliest retirement age is a plan-design choice.

[rocknrolls2]

Building on what Peter has said, in addition, you need to pay particular attention both to what the order says involving distribution as well as the terms of the plan document in determining whether and when an alternate payee may receive a plan distribution.

[AMDG]

FWIW - I love these message boards! I try to guess at the answer before clicking on the links in the email - and my memory served me well today.  A big thank you to everyone who contributes!

 

[Nate S]

6 hours ago, rocknrolls2 said:

Building on what Peter has said, in addition, you need to pay particular attention both to what the order says involving distribution as well as the terms of the plan document in determining whether and when an alternate payee may receive a plan distribution.

Biggest problem QDRO's have, the order's usage of the words "must", "will", and "have to" when it comes to the terms and conditions of the distribution to the AP.  The order can't compel a Plan to do anything that the Plan Document doesn't already allow.  As the Plan Document must say within itself, it is controlling in case of any conflict.

[Wacko in Winnebago]

That was where my initial question was rooted, but it was my understanding that the plan documents were required to comply with ERISA (and other relevant statutes), such as the requirement of an anti-alienation provision. Thank you to Mr. Gulia for providing the legal authority I hadn't found.

[Jen S]

Reverse question of sorts.  If the plan provides multiple forms of distribution for APs can the QDRO actually limit those options?  For example if a plan provides for a deferred benefit, lump sum payout or single life annuity, could a QDRO specify an immediate disbursement and essentially eliminate the deferred option?

[Bri]

Why wouldn't the AP simply elect what they want from the various available options, rather than trying to force the form of payment through the Order?

[Nate S]

18 hours ago, Jen S said:

Reverse question of sorts.  If the plan provides multiple forms of distribution for APs can the QDRO actually limit those options?  For example if a plan provides for a deferred benefit, lump sum payout or single life annuity, could a QDRO specify an immediate disbursement and essentially eliminate the deferred option?

Only if it placed the onus to elect the lump sum payout on the AP, instead of compelling the Plan to make the payment that way.