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Problems with QDRO Identified After Plan Termination -- Benefits in Pay Status
BenefitsLink Message BoardsLink to more items from this source
Aug. 5, 2021

"I'm hoping QDRO experts here might have some ideas on how to address this situation. A QDRO was accepted by the DB plan in 1998. In addition to dividing the interest under the plan between husband and ex-wife, the QDRO required the husband to select a form of benefit providing a survivor benefit equal to at least 25% of husband's benefit under the plan and name ex-wife as the sole beneficiary of the survivor benefits. QDRO also stated ex-wife was to be treated as the 'spouse' for all purposes under the plan. Plan accepted the QDRO as written.

Husband retired in mid-2000s, selected a joint and survivor annuity and named ex-wife as beneficiary. In 2019, pension plan is terminated and benefits transferred to an annuity provider. Participants were given the option of taking a lump sum upon plan termination. Husband was not allowed to take a lump sum due to the QDRO requiring he select a form of benefit with a survivor benefit. He was upset and wanted to 'take his ex-wife off the pension.' Plan sponsor tells him they can't do anything due to the court order (the QDRO) and that the husband would need to go back to court to change it. So, in December 2020, husband gets a court order modifying the QDRO in which both husband and ex-wife agree to remove ex-wife from the pension entirely (what?), designate a new beneficiary for any survivor benefits, and agree that the remaining balance of the pension should be released in full to the husband.

Plan sponsor explains the plan is terminated and these changes cannot be made, even if ordered by a court (except beneficiary maybe). Husband and the husband's current wife are extremely upset.

[1] Was the law was different in 1998? Could a QDRO put restrictions on a participant's future benefits earned after the date of the QDRO (i.e. requiring form of payment with survivor benefits following divorce)? If not, I don't believe the QDRO should have been qualified and accepted by the plan as it was written. [2] What liability does the plan sponsor have for accepting the DRO originally? What about for not allowing husband to select a lump sum when the plan was being terminated? [3] What do we do now that the plan has been terminated and benefits are in pay status with an annuity provider? Any ideas on what the plan sponsor can and/or should do in this situation?"

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