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Under a self directed account plan, does the plan administrator have t


Guest ElizabethH

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Guest ElizabethH

Under a self directed account plan, does the plan administrator have to offer the alternate payee the opportunity to self direct the investment of the alternate payee's share when the intention is to pay out the share immediately. The plan received a QDRO in December, and was at the time undergoing a change over. All accounts were held in money market investments. When hold period expired the participant's account was invested per his direction. The alternate payee was never given an opportunity to direct. Payment is to be made now to the alternate payee? Is there a problem?

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The document should define who is entitled to direct the investments and alternate payee may not be one. You said the alternate payee is now getting distribution. One of the questions is how long the money stayed uninvested. If timing was right compared to the stock market, then mistake was may be to benefit of alternate payee and nothing may happen. One of the things to briefly review is each investment choice's performance during this period. I sure wouldn't volunteer possible problem to alternate payee. And even if there is a problem, this sounds like nothing may happen because of amount involved and/or this is unique and isolated event.

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The plan document or the written QDRO procedures should specify how investments will be handled. It is better to allow the alternate payee to direct the investments. Otherwise the plan may fall out of compliance with ERISA section 404©. The plan fiduciary with investment responsibility could be held responsible for the investments. Under ERISA investment standards, holding amounts in a money market investment for 3 months pending a distribution is not a problem. How nice that the alternate payee is taking a distribution. Now get ready for the one who decides to stay in the plan a while.

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