QDRO Compliance & Regulatory Requirements 4 — Questions and Answers
Question 1: A QDRO specifying benefits for a plan that has been merged into another plan must be honored by the successor plan under which principle?
- The successor plan assumes all QDRO obligations of the merged plan (Correct answer)
- The QDRO becomes void upon plan merger
- The alternate payee must obtain a new court order
- Only benefits accrued after the merger are covered
Correct answer: The successor plan assumes all QDRO obligations of the merged plan
Under ERISA, a successor plan that assumes liabilities in a merger also assumes existing QDRO obligations — the alternate payee's rights survive the plan merger.
Question 2: For a 403(b) tax-sheltered annuity plan, which of the following statements about QDROs is correct?
- IRC § 414(p) QDRO rules apply, but ERISA procedural requirements may not fully apply depending on the plan type (Correct answer)
- QDROs are never available for 403(b) plans
- 403(b) plans use a different 24-month determination period
- State law exclusively governs 403(b) QDRO compliance
Correct answer: IRC § 414(p) QDRO rules apply, but ERISA procedural requirements may not fully apply depending on the plan type
IRC § 414(p) applies to 403(b) plans for tax purposes, but some 403(b) plans (e.g., church plans) may be exempt from ERISA procedural requirements.
Question 3: Under IRC § 402(e)(1)(A), mandatory 20% federal withholding applies to eligible rollover distributions. How does this rule interact with QDRO distributions to an alternate payee?
- The 20% withholding applies unless the alternate payee rolls the distribution to an IRA (Correct answer)
- No withholding ever applies to QDRO distributions
- The participant must pay the 20% on behalf of the alternate payee
- A flat 10% rate applies instead of 20%
Correct answer: The 20% withholding applies unless the alternate payee rolls the distribution to an IRA
QDRO distributions that are eligible rollover distributions are subject to 20% mandatory withholding unless the alternate payee elects a direct rollover to an IRA or other eligible plan.
Question 4: A QDRO is received after the participant's death but before benefits have been distributed. Under ERISA, how should the plan respond?
- The plan must evaluate the order and, if valid, pay benefits to the alternate payee in priority over other beneficiaries as specified (Correct answer)
- The QDRO is automatically void after the participant's death
- Benefits pass entirely to the named beneficiary
- The plan must wait for probate court approval
Correct answer: The plan must evaluate the order and, if valid, pay benefits to the alternate payee in priority over other beneficiaries as specified
A valid QDRO received after the participant's death can still be honored if it was entered before the participant's death and the plan has not yet distributed the benefits.
Question 5: The plan administrator's QDRO determination procedures must be established and maintained in writing and made available to participants and alternate payees. This requirement comes from:
- ERISA § 206(d)(3)(G) (Correct answer)
- IRC § 401(a)(13)
- DOL Advisory Opinion 2004-02A
- PBGC Technical Update 00-3
Correct answer: ERISA § 206(d)(3)(G)
ERISA § 206(d)(3)(G) specifically requires that plan administrators establish reasonable written QDRO determination procedures and provide them upon request.
Question 6: Which of the following is a permissible provision in a QDRO for a defined benefit plan?
- Awarding the alternate payee a separate interest using the coverture fraction method (Correct answer)
- Requiring the plan to pay the alternate payee more than 100% of the participant's accrued benefit
- Ordering benefits in a form not available under the plan other than the survivor annuity exception
- Requiring retroactive benefit increases not already in the plan
Correct answer: Awarding the alternate payee a separate interest using the coverture fraction method
The coverture fraction (years of plan participation during marriage divided by total years of participation) is a well-established and permissible method for dividing defined benefit plan benefits.
Question 7: If a QDRO is silent on the treatment of a participant's subsequent retirement, disability, or death benefits, who bears the risk of those contingencies?
- The alternate payee may bear the risk depending on whether a separate interest or shared payment approach is used (Correct answer)
- The plan bears full liability for any ambiguity
- The participant always bears all post-QDRO risks
- State law automatically governs all contingencies
Correct answer: The alternate payee may bear the risk depending on whether a separate interest or shared payment approach is used
Under a shared payment approach, the alternate payee's benefits may cease on the participant's death, whereas a separate interest approach insulates the alternate payee from that risk — the drafting choice matters.
QDRO Compliance & Regulatory Requirements 4
A QDRO specifying benefits for a plan that has been merged into another plan must be honored by the successor plan under which principle?