Can a QDRO under a defined benefit pension plan provide the alternate payee with “interest and investment earnings” on his/her assigned share of the benefits?
A-27: No. Remember, under a defined benefit pension plan, there are no accounts established for plan participant’s. Consequently, there are no interest or investment earnings applied to a participant’s benefits. A QDRO may only state the alternate payee’s share of the benefits in one of three ways: 1. As a specified percentage of the participant’s accrued benefit as of a certain date; or 2. As a specified dollar amount of the participant’s accrued benefit; or 3. As a coverture fraction applied to the participant’s accrued benefit as of a certain date, typically the date of his/her retirement, or the alternate payee’s elected benefit commencement date, if earlier. Therefore, in lieu of using terminology such as “interest or investment earnings”, you may utilize method 3, or a similar method using a formula acceptable to the Plan Administrator, if your intent is to provide growth protection for the alternate payee, as opposed to freezing his/her share of the benefits as of the date of di
Related Questions
- How will the alternate payees share of the benefits be "allocate" among the participants various accounts and/or subaccounts under a defined contribution plan?
- What happens to an alternate payees share of a retirement benefit if the retired member predeceases the alternate payee?
- Are benefit payments to the Alternate Payee automatic once the QDRO is qualified?
