QDRO Financial Analysis & Plan Evaluation 4

Question 1

A defined benefit QDRO assigns the alternate payee a 'fixed dollar amount' of $800/month rather than a percentage. What is the primary risk of this drafting approach?

Accepted Answer

The alternate payee bears no investment risk but the real value erodes with inflation over time

Answer

A fixed dollar amount protects the alternate payee from benefit reductions but does not adjust for inflation, reducing purchasing power over a long retirement.

Question 2

Under IRC §72(t), early distributions from a retirement plan generally carry a 10% penalty. Which QDRO-related distribution is exempt from this penalty?

Accepted Answer

Distributions made to an alternate payee pursuant to a QDRO

Answer

IRC §72(t)(2)(C) exempts QDRO distributions paid directly to an alternate payee from the 10% early withdrawal penalty.

Question 3

A plan provides a 'subsidized early retirement benefit' — a pension at age 55 worth more than the actuarial equivalent of the age-65 benefit. Should the QDRO capture this subsidy for the alternate payee?

Accepted Answer

Yes, the QDRO should specify participation in the early retirement subsidy so the alternate payee benefits from the enhanced value

Answer

Explicit QDRO language ensuring the alternate payee receives the subsidized early retirement benefit preserves this valuable plan feature in the divided benefit.

Question 4

What does 'investment gain and loss passthrough' mean in the context of a defined contribution QDRO?

Accepted Answer

The alternate payee's segregated account grows or shrinks with actual plan investment performance after the valuation date

Answer

Gain and loss passthrough means the alternate payee's share tracks actual investment performance from the valuation date through the transfer, aligning risk and reward with market outcomes.

Question 5

A QDRO covers a multiemployer pension plan. Which unique challenge arises compared to single-employer plans?

Accepted Answer

The alternate payee's benefit is calculated under a complex reciprocal agreement that may differ by contributing employer

Answer

Multiemployer plans involve contributions from multiple employers under collective bargaining agreements, and the benefit formula may depend on hours worked under each contributing employer, complicating the valuation.

(QDRO) Certified Qualified Domestic Relations Order Specialist Practice Test

(QDRO) Certified Qualified Domestic Relations Order Specialist Practice Test

QDRO Financial Analysis & Plan Evaluation 4