Alternate Payee Beneficiaries.

I have seen QDROs that provide an Alternate Payee is prohibited from listing a new spouse as beneficiary.

Is this typical?  Is it allowed?  Can a plan refuse to allow this, and instead just say, "once the AP has his/her own account, he/she can name whatever beneficiary he/she wants?"

We would prefer to just divide the account and not have to keep track of additional restrictions like this.  But we will if we are required to.

Does it make any difference if the plan is a DC or DB?

Have you considered IRC 414(p)(4)(A)(iii)?

Some domestic-relations orders try to get an alternate payee a power to name the alternate payee’s beneficiary, and some plans’ administrators react by deciding that such a DRO is not a QDRO.

(I express no view about whether so deciding might be a correct or incorrect application of ERISA § 206(d)(3).)

If the plan’s administrator prefers the absence of a constraint, the administrator might want its lawyer’s advice about whether an order would “require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan,” which would make such an order fail a QDRO condition. ERISA § 206(d)(3)(D)(i).

It matters whether a retirement plan is a defined-benefit plan or an individual-account plan. For example, a defined-benefit plan might have no form of benefit that allows a participant to name the participant’s beneficiary.

And it matters whether a plan allows or precludes a distribution before the participant’s retirement.

An alternate payee’s right to designate a beneficiary for the alternate payee’s portion must be no greater than the participant’s right to designate a beneficiary. See ERISA § 206(d)(3)(D)(i); 26 C.F.R. § 1.401(a)-13(g)(4)(iii)(B). If a plan does not provide a participant a right or power to name the participant’s beneficiary, an order that purports to grant, regarding that plan, a nonparticipant a right or power to name a beneficiary would not be a QDRO.

Different law and plan provisions might apply for a church plan, governmental plan, plan for only business owners, non-US plan, or other non-ERISA plan.

If a plan might allow an alternate payee to name the alternate payee’s beneficiary, does the plan’s administrator have sufficient capabilities to receive and record those designations (and changes)?

I have seen plan documents that for some reason forbid Alt Payees from designating a beneficiary.   

I will join the group and, without knowing any of the facts will assume that it's an ERISA qualified plan, assume that it's a defined benefit plan, assume that it relates to a shared interest allocation of benefits and not to a separate interest, and assume that it can be traced to the holding in Boggs. 

But first, read about Terminal Interest Plans and Ownership Interest 5 CFR 838.237(b)(3), both of which permit what Boggs will not, that is, to ability to name a beneficiary to receive unpaid benefits otherwise payable to the Alternate Payee.    

But are we reading Boggs correctly?.

Find Boggs at https://supreme.justia.com/cases/federal/us/520/833/

That's the real question.  What do you think?  

David

TERMINABLE INTEREST DEFINED BENEFIT PLANS REV'D 03-16-24.pdf Ownership Interest - 5 CFR 838.237(B)(3).pdf

Sorry for the delay.

It is an ERISA DB plan, and we are talking about a separate interest division.

Can the QDRO expressly limit who the AP can name as her beneficiary (e.g. "you can't name a new spouse" or even "you must name our shared children")?

Can the Plan refuse to qualify an Order that has those express limitations, and instead take the position that once the AP has her own interest, she can name whoever she wants as her beneficiary?

What is the separate interest the might-be alternate payee would get? A specified set of payments? A single-sum amount?

Other than the plan providing a survivor annuity for a participant’s surviving spouse (whether actual or deemed), does the plan allow a participant a right or power to name a beneficiary for a death benefit other than a survivor annuity?

Partially baked thoughts:

If the order restricts what the plan would allow, the plan probably does not want to have to make a special case for the order and treat it differently or increase its monitoring. If the plan allows beneficiaries to to name beneficiaries (e.g. if alternate payee is allowed under plan terms to have an interest in the form of a J&S annuity, but the order says no new spouse can be named as contingent beneficiary), the plan probably does not want the extra administrative burden of determining if the named contingent annuitant is a new spouse (or whoever else may be disallowed by the order). The plan would want to follow the terms of any QDRO, so the plan would probably elect not to qualify the order, which it could rightfully do because the order would impose terms on the plan that are inconsistent with how the plan is designed to provide benefits.

David, § 838.237 doesn't grant rights the Boggs court didn't. Boggs ruled that a would-be alternate payee has to be alive at the time a DRO is qualified, while § 838.237 deals instead with provisions in a COAP approved prior to a former spouse's death.