Why Should the Words “Vest,” “Vested,” and “Vesting” Never Be Arbitrarily Used in a QDRO?
When describing the portion of the benefits payable to an alternate payee, do not confuse the phrase “vested benefits as of the date of divorce” with the participant’s accrued benefit under the plan. The alternate payee’s share of the benefit should be based on the participant’s accrued benefit as of a particular date, not his vested benefit, nor vested accrued benefit. Because an alternate payee can commence her share of the benefits on an unreduced basis only at the participant’s normal retirement age, vesting is generally no longer an issue and only causes confusion for the plan administrator interpreting the order. The fact that the participant may have been only 60 percent vested in his accrued benefit on the date of divorce should have no bearing on the alternate payee’s eventual annuity distribution. Because the alternate payee, too, must generally wait years before commencing her benefits, the vesting percentage associated with her share grows right along with the participant’s
