Plan Administrator's Guide

Importance of Written QDRO Procedures | Receipt of an Executed QDRO
Timing Requirements for Determining Qualified Status of an Order
Segregation of Plan Benefits While QDRO Process Is Pending | When an Order Does Not Qualify as a QDRO
Once a QDRO is Qualified | What if the Participant Dies Before the Order is Qualified?
What Happens if the Alternate Payee Dies?

Segregation of Plan Benefits While QDRO Process Is Pending

Pursuant to Code Section 414(p)(7), a plan administrator must withhold and separately account for any amounts that would have become payable to an alternate payee, but for the plan administrator's determination that the order qualifies as a QDRO. In other words, the plan administrator must withhold (or segregate) any amounts that would have been paid to the alternate payee if the order had been determined to be a QDRO. If such order is not determined to be a QDRO within 18 months following the date on which the first payment would have otherwise been made to the alternate payee, such segregated amounts (those amounts that were separately accounted for, including any interest thereon as applicable) must be paid by the plan administrator to the person or persons entitled to them as if there had been no domestic relations order (i.e., to the plan participant or his or her beneficiaries). If the order is determined to be a QDRO within such 18-month period, the segregated amounts called for under the order, along with any interest accrued thereon, shall be distributed to the alternate payee in accordance with the terms of the QDRO.

Again, the application of this 18-month period should not be confused with the plan administrator's requirement to render its determination as to the qualified status of the order within a reasonable period of time after the receipt of such order. Pursuant to Code Section 414(p)(6)(A)(ii), plan administrators must make their determinations as to the qualified status of orders within a reasonable period of time after the receipt of the order. Further, the plan must adopt reasonable written procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders.