Defined Benefit Strategies and QDROs: A Couple Common Questions

Defined benefit strategies involved in a QDRO can create lots of questions both for the plan participant as well as the other partner. If not reviewed attentively, minor errors can cause confusion for the two parties, perhaps pulling them back into court to hash out details. This is one reason why QDRO specialists, who have years of expertise in reviewing these records in addition to fine tuning them to comply with defined benefit plan demands, in many cases are brought to the table to help with this specific phase. Since retirement plans are frequently among the greatest advantages to be split in a divorce, it is worth the extra time and effort to make sure that it is done correctly.

Most of the time, the other partner may wish to understand if they is able to get the amount from the defined benefit plan upfront following the QDRO is finalized. The first that an alternative payee can typically receive cash from a defined benefit plan is at or following the plan participant’s first age of retirement. This really is normally summarized in the strategy itself.

Some orders, though, will limit the alternative payee from getting the benefit until the plan participant is really receiving it. In case the participant already has access to monthly checks from the pension when the QDRO is approved, the alternative payee should start receiving checks immediately. Remember the details of the strategy will determine when the real benefits are paid out. Typically, defined benefit plans issue payments on the first of the month and they’re only paid once during a month interval. As an outcome of this, it may take a while before an alternative payee really begins receiving payments from a defined benefit plan. Typically a followup question to the concern over getting paid right away is whether these benefits could be paid in a lump sum. Generally, the reply is no. Some strategy kinds might allow for a lump sum payment, but generally a defined benefit plan is only going to pay out on a monthly basis. !

Another opinion question has to do with what occurred to the alternate payee’s benefit when the plan participant passes away. This depends particularly on the verbiage in the QDRO, once again emphasizing the importance of an expert’s review. In addition, it depends upon the time at which order was received in comparison with when the player began getting benefits. There are instances where the participant’s departure could trigger a stop in payments, though, and that means you should ask about this in the drafting of the QDRO. !