QDRO Legal Foundations of Domestic Relations Orders 5 — Questions and Answers
Question 1: A participant is already receiving retirement benefits when a QDRO is submitted to the plan. The QDRO requires payments beginning with the participant's next payment. Can the plan honor this order?
- No, because a QDRO cannot be entered after benefits have already commenced
- Yes, a QDRO can be entered after benefit payments have started and can redirect a portion of ongoing payments (Correct answer)
- No, because the participant's election of a payment form is irrevocable and binds the alternate payee
- Yes, but only if the participant consents to the division after retirement
Correct answer: Yes, a QDRO can be entered after benefit payments have started and can redirect a portion of ongoing payments
A QDRO can be entered and qualified at any time, including after the participant has begun receiving benefits, redirecting a portion of ongoing payments to the alternate payee.
Question 2: Which of the following describes the legal status of a domestic relations order that meets all QDRO requirements BEFORE the plan administrator formally determines it is qualified?
- It has no legal effect until the plan administrator issues a written qualification determination
- It is treated as a QDRO from the moment it is entered by the court, and the plan must begin segregating funds immediately upon receipt (Correct answer)
- It is provisionally effective but the alternate payee has no rights until the 18-month period expires
- It is void until ratified by both the participant and the plan sponsor
Correct answer: It is treated as a QDRO from the moment it is entered by the court, and the plan must begin segregating funds immediately upon receipt
Upon receipt of a domestic relations order, the plan must immediately segregate potentially payable amounts, regardless of whether the formal qualification determination has been made.
Question 3: An order that was previously determined NOT to be a QDRO is corrected and resubmitted to the plan. The plan administrator must:
- Reject the resubmission because once denied, an order cannot be reconsidered
- Apply the same review process as if it were a new domestic relations order submission (Correct answer)
- Automatically qualify the corrected order without further review
- Refer the corrected order to the original issuing court for re-certification
Correct answer: Apply the same review process as if it were a new domestic relations order submission
A corrected or amended domestic relations order submitted after a prior denial receives the same full review process as any new order submission.
Question 4: For a QDRO involving a defined benefit plan, which of the following actuarial factors is most relevant when converting an alternate payee's percentage share into a specific dollar benefit amount?
- The alternate payee's current earned income and tax bracket
- The plan's interest rate and mortality assumptions used to calculate present values (Correct answer)
- The participant's Social Security primary insurance amount
- The Consumer Price Index applicable at the time of the divorce
Correct answer: The plan's interest rate and mortality assumptions used to calculate present values
Actuarial conversions for defined benefit QDROs rely on the plan's own interest rate and mortality table assumptions, which determine the present value and equivalent benefit amounts.
Question 5: A QDRO assigns 'all of the participant's vested account balance' to the alternate payee. The participant also has unvested employer contributions. The plan must:
- Transfer both vested and unvested amounts to the alternate payee immediately
- Transfer only the vested amount; unvested amounts remain subject to the plan's vesting schedule (Correct answer)
- Accelerate vesting of all unvested amounts upon receipt of the QDRO
- Hold both vested and unvested amounts in escrow pending the participant's departure from employment
Correct answer: Transfer only the vested amount; unvested amounts remain subject to the plan's vesting schedule
A QDRO can only assign vested benefits unless the order specifically addresses unvested amounts and the plan permits such an assignment; unvested amounts remain subject to forfeiture conditions.
Question 6: Under ERISA, which party bears the primary responsibility for ensuring that a domestic relations order meets the requirements to qualify as a QDRO?
- The plan administrator, who must proactively draft or correct the order
- The participant and alternate payee (or their attorneys), who must draft an order that meets the plan's requirements (Correct answer)
- The Department of Labor, which must pre-approve all QDROs before submission
- The IRS, which reviews all domestic relations orders for tax compliance prior to plan acceptance
Correct answer: The participant and alternate payee (or their attorneys), who must draft an order that meets the plan's requirements
The parties and their counsel are responsible for drafting an order that satisfies ERISA's requirements; the plan administrator only determines whether the submitted order qualifies.
Question 7: A QDRO is entered in connection with a legal separation (not a divorce). Is this order eligible to qualify as a QDRO?
- No, because ERISA only recognizes orders issued in connection with a final divorce decree
- Yes, because ERISA includes legal separation as a qualifying domestic relations matter (Correct answer)
- No, because the marriage is still legally intact and ERISA prohibits division of marital assets
- Yes, but only if the state defines legal separation as equivalent to divorce for property division purposes
Correct answer: Yes, because ERISA includes legal separation as a qualifying domestic relations matter
ERISA's definition of a domestic relations order explicitly includes orders issued pursuant to a state domestic relations law in connection with divorce, annulment, legal separation, or related support proceedings.
QDRO Legal Foundations of Domestic Relations Orders 5
A participant is already receiving retirement benefits when a QDRO is submitted to the plan.
The QDRO requires payments beginning with the participant's next payment.
Can the plan honor this order?