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issuance of a loan for divorce


Lou81

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I have a participant that is requesting a loan.

He indicated it is for a divorce.

The plan does not require spousal consent

We do not have a DRO.

is there anything that would restrict him from taking the loan at this time?

Thank you!

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Check the QDRO procedure in your plan document. Many of them say something to the effect that the Plan Administrator "may" put a temporary hold on distributions/loans if they have reason to know that a divorce/QDRO is pending. This can be a tricky area - you may need to check with ERISA counsel depending upon facts and circumstances, timing, etc.

Example: Suspension of Participant distributions or loans. If the Administrator is on notice (verbal or written) regarding a pending domestic relations action (e.g., a divorce) and has a reasonable belief the Participant's account may become subject to a QDRO, the Administrator may suspend processing the Participant's distribution or loan requests pending resolution.

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On 5/6/2024 at 2:30 PM, QDROphile said:

As they should. And the administrator should respect that line.

Indeed.  I never understood why a document would refer to knowledge or "reason to  know" of a pending divorce.  Absent something actionable (like A will get X% of B's assets), how is a plan supposed to deny something a participant is entitled to?

 

 

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