QDRO QDRO Plan Administration & Distribution Methods 1 — Questions and Answers
Question 1: When a QDRO assigns a portion of a defined benefit plan to an alternate payee, which distribution option allows the alternate payee to receive benefits immediately upon the participant's earliest retirement eligibility date?
- Separate interest approach (Correct answer)
- Shared payment approach
- Lump sum immediate distribution
- Deferred annuity election
Correct answer: Separate interest approach
The separate interest approach gives the alternate payee an independent benefit that can commence at the participant's earliest retirement eligibility date, regardless of when the participant actually retires.
Question 2: Under the shared payment approach in a defined benefit QDRO, when do the alternate payee's benefits cease?
- Upon the participant's death (Correct answer)
- Upon the alternate payee's death
- Upon whichever death occurs first
- After 10 years of payments
Correct answer: Upon the participant's death
Under the shared payment approach, the alternate payee receives a share of the participant's actual benefit payments, so benefits cease when the participant dies unless survivor coverage is specified.
Question 3: A plan administrator receives a QDRO that assigns a specific dollar amount rather than a percentage of the participant's account. This type of assignment in a defined contribution plan is known as:
- Fixed dollar assignment (Correct answer)
- Percentage offset method
- Coverture fraction method
- Pro rata allocation
Correct answer: Fixed dollar assignment
A fixed dollar assignment specifies an exact monetary amount to be transferred to the alternate payee's separate account from the participant's defined contribution plan balance.
Question 4: Which method of dividing a defined benefit pension uses a formula that reflects only the marital portion of the benefit based on years of service during the marriage relative to total years of service?
- Coverture fraction (Correct answer)
- Present value offset
- Deferred distribution
- Immediate offset
Correct answer: Coverture fraction
The coverture fraction multiplies the total benefit by the ratio of marital service years to total service years to isolate the portion earned during the marriage.
Question 5: In a defined contribution plan QDRO, what is the typical treatment of investment gains and losses on the alternate payee's assigned amount between the date of divorce and the date of segregation?
- Prorated gains and losses are applied to the alternate payee's share (Correct answer)
- The alternate payee receives only the original assigned amount with no adjustments
- All gains go to the participant; losses are absorbed by the plan
- Investment results are split 50/50 regardless of assignment amount
Correct answer: Prorated gains and losses are applied to the alternate payee's share
Most QDROs for defined contribution plans require that the alternate payee's assigned share be adjusted for prorated investment gains and losses from the assignment date through segregation.
Question 6: When a plan administrator segregates funds under a QDRO for an alternate payee in a 401(k) plan, the segregated amount is typically placed in:
- A separate account in the alternate payee's name within the plan (Correct answer)
- A taxable brokerage account outside the plan
- A joint account held by both parties
- The plan's general trust fund pending distribution
Correct answer: A separate account in the alternate payee's name within the plan
Upon QDRO qualification, the plan administrator typically establishes a separate sub-account within the plan in the alternate payee's name to hold the assigned funds.
QDRO QDRO Plan Administration & Distribution Methods 1
When a QDRO assigns a portion of a defined benefit plan to an alternate payee, which distribution option allows the alternate payee to receive benefits immediately upon the participant's earliest retirement eligibility date?