QDRO QDRO Plan Administration & Distribution Methods 2 — Questions and Answers
Question 1: A QDRO specialist is reviewing a state pension plan QDRO. Unlike private-sector plans, state and local government plans are governed by which law rather than ERISA?
- State domestic relations law and state pension statutes (Correct answer)
- Internal Revenue Code Section 414(p)
- ERISA Section 206(d)
- Uniform Disposition of Community Property Act
Correct answer: State domestic relations law and state pension statutes
State and local government plans are exempt from ERISA and are instead governed by applicable state law, which typically has its own domestic relations order (DRO) requirements.
Question 2: For a military retirement QDRO under the Uniformed Services Former Spouses Protection Act (USFSPA), the maximum percentage of disposable retired pay that can be directly paid to a former spouse by the Defense Finance and Accounting Service (DFAS) is:
- 50% (Correct answer)
- 65%
- 75%
- 100%
Correct answer: 50%
DFAS will directly pay a former spouse up to 50% of the member's disposable retired pay under a qualifying court order pursuant to the USFSPA.
Question 3: Under a defined benefit plan QDRO using the separate interest approach, the plan must offer the alternate payee which optional form of benefit that is available to the participant?
- All optional forms available to the participant as of the assignment date (Correct answer)
- Only a lump-sum distribution
- Only a single life annuity
- Only joint and survivor annuity forms
Correct answer: All optional forms available to the participant as of the assignment date
A separate interest QDRO must preserve for the alternate payee all optional forms of benefit that were available to the participant at the time of the QDRO assignment.
Question 4: When a plan administrator receives a domestic relations order, the interim period during which benefit payments must be held or segregated while the order is being reviewed is typically:
- 18 months (Correct answer)
- 12 months
- 6 months
- 24 months
Correct answer: 18 months
ERISA requires plan administrators to segregate the amounts that would be payable under a potential QDRO for up to 18 months while determining whether the order is qualified.
Question 5: In a cash balance plan, the participant's benefit is expressed as a hypothetical account balance. A QDRO dividing a cash balance plan most commonly assigns the alternate payee:
- A percentage or dollar amount of the participant's hypothetical account balance (Correct answer)
- A monthly annuity payment based on projected earnings
- A fixed number of pension credits
- A share of the employer's future contributions only
Correct answer: A percentage or dollar amount of the participant's hypothetical account balance
Because cash balance plans track benefits as account balances, QDROs typically assign the alternate payee a specific percentage or dollar amount of the participant's hypothetical account balance.
Question 6: When a QDRO is entered after the participant has already retired and is receiving pension payments, the plan administrator generally must:
- Begin paying the alternate payee their share from the next regular payment cycle after qualification (Correct answer)
- Recalculate all past payments and issue a retroactive lump sum
- Reject the order because benefits are already in pay status
- Suspend participant payments until the alternate payee share is determined
Correct answer: Begin paying the alternate payee their share from the next regular payment cycle after qualification
Once a QDRO is qualified, the plan administrator begins directing the alternate payee's assigned share from the next scheduled payment, with no requirement to recalculate past payments absent specific order language.
QDRO QDRO Plan Administration & Distribution Methods 2
A QDRO specialist is reviewing a state pension plan QDRO.
Unlike private-sector plans, state and local government plans are governed by which law rather than ERISA?