QDRO Compliance & Regulatory Requirements 5 — Questions and Answers
Question 1: Under IRS Notice 97-11, what guidance is provided regarding model QDRO language?
- It provides sample language plan administrators can use and clarifies key QDRO drafting requirements (Correct answer)
- It eliminates the need for court approval of QDROs
- It extends the determination period to 24 months for governmental plans
- It creates a safe harbor for plan sponsors who accept any court-issued order
Correct answer: It provides sample language plan administrators can use and clarifies key QDRO drafting requirements
IRS Notice 97-11 provides model QDRO language and addresses common drafting questions to help plan administrators and practitioners comply with IRC § 414(p).
Question 2: Under ERISA, can a plan impose fees on participants or alternate payees for processing a QDRO?
- Yes, if the plan document authorizes such fees and they are reasonable (Correct answer)
- No, ERISA prohibits any fees related to QDRO processing
- Yes, but only the alternate payee can be charged
- Yes, up to a maximum of $500 regardless of plan terms
Correct answer: Yes, if the plan document authorizes such fees and they are reasonable
Plan administrators may charge reasonable QDRO processing fees if such fees are authorized by the plan document and consistently applied.
Question 3: A participant in a 401(k) plan has both pre-tax and Roth contributions. A QDRO awards the alternate payee 50% of the account. How are the tax attributes of the awarded amount treated?
- The alternate payee receives a proportionate share of both pre-tax and Roth sub-accounts, maintaining their respective tax character (Correct answer)
- All amounts are converted to pre-tax upon transfer to the alternate payee
- The alternate payee receives only the pre-tax portion
- Roth amounts cannot be divided by a QDRO
Correct answer: The alternate payee receives a proportionate share of both pre-tax and Roth sub-accounts, maintaining their respective tax character
When a QDRO divides a 401(k) account with both pre-tax and Roth amounts, the alternate payee receives a proportionate share of each sub-account and the tax character of each portion is preserved.
Question 4: Which regulatory body has primary enforcement authority over private-sector plan compliance with QDRO procedures?
- The Department of Labor (DOL) (Correct answer)
- The IRS exclusively
- The PBGC
- The Securities and Exchange Commission
Correct answer: The Department of Labor (DOL)
The DOL has primary authority to enforce ERISA's QDRO procedural requirements for private-sector plans, including reviewing plan administrator procedures.
Question 5: A QDRO that assigns benefits from a SIMPLE IRA is:
- Not possible — QDROs apply only to employer-sponsored qualified plans, not IRAs (Correct answer)
- Processed under the standard 18-month ERISA determination period
- Subject to DOL review before taking effect
- Permitted if the SIMPLE IRA has been in existence for at least 2 years
Correct answer: Not possible — QDROs apply only to employer-sponsored qualified plans, not IRAs
QDROs only apply to employer-sponsored retirement plans; IRAs (including SIMPLE IRAs) are divided using a transfer incident to divorce under IRC § 408(d)(6), not a QDRO.
Question 6: Under ERISA § 206(d)(3)(J), a QDRO may require a plan to pay benefits to an alternate payee as early as the date the participant:
- Attains the earliest retirement age under the plan, even if the participant has not actually retired (Correct answer)
- Reaches age 65 regardless of plan terms
- Terminates employment with the plan sponsor
- Files a retirement application with the plan
Correct answer: Attains the earliest retirement age under the plan, even if the participant has not actually retired
ERISA § 206(d)(3)(J) allows a QDRO to require payment to the alternate payee beginning at the participant's earliest retirement age under the plan, even if the participant continues working.
Question 7: When a plan administrator makes a good-faith determination that an order is (or is not) a QDRO and acts accordingly, they are generally protected from liability under:
- ERISA § 206(d)(3)(H)(ii), which provides a safe harbor for good-faith determinations (Correct answer)
- The business judgment rule under state corporate law
- IRC § 415 contribution limits
- PBGC insurance coverage provisions
Correct answer: ERISA § 206(d)(3)(H)(ii), which provides a safe harbor for good-faith determinations
ERISA § 206(d)(3)(H)(ii) provides a safe harbor protecting plan administrators from liability if they act in good faith in making their QDRO determination and distributing funds accordingly.
QDRO Compliance & Regulatory Requirements 5
Under IRS Notice 97-11, what guidance is provided regarding model QDRO language?