Most people often think that once a judge has signed their QDRO order, that seals the deal. In reality, it is much more complicated than that. The reason is that the Plan Administrator has the final say, and can decide to reject a QDRO for obvious reasons which will be expanded on in this article.
- Wrong Plan Name
Among the top reasons why Plan Administrators reject QDROs is the wrong plan name. Most times the parties involved don’t know the name of the plan to be divided and thus, leading to rejection by the Plan Administrator. Most times, the parties use the fiduciary trust company as the plan name. For instance, if the pension holder has a 401K plan with XYZ company, but the money is held in an account with Vanguard, the correct plan’s name will be something like XYZ company 401K, and not Vanguard 401k plan.
- Form of benefit designation for defined benefit plan
The fact is that not all plans have the same benefit options. Sometimes, a plan will not allow the alternate payee to determine if the benefits are paid in the lifetime of the alternate payee instead of the lifetime of the plan participant. When parties make that choice, ideally the QDRO gets rejected by the Plan Administrator.
- When payment begins
Specific plan types don’t allow the alternate payee to request an immediate distribution, or to request a time for benefits to begin. In the same manner, a QDRO can be rejected by the plan administrator if no starting date is requested.
Benefits can begin either at the early retirement stage, regular retirement age, or perhaps as stated in the plan. The plan, however, should allow the alternate payee to choose when payment should begin.
- Form of payment
When parties designate a form of payment that is not consistent with the requirements of the plan, this can lead to outright rejection by the plan administrator. Most often, parties involved assume that a traditional Defined Benefit Plan allows a lump-sum distribution. But in reality, only a few offer that form of payment.
- The beneficiary for the defined contribution plan
When an alternate payee dies before receiving their benefits, most plans require that the QDRO name an additional alternate payee. The plan entails how the money is paid to the alternate payee in the absence of a designated beneficiary.
Numerous factors can lead the Plan Administrator to reject a QDRO, and it is best to work closely with a QDRO attorney for the best outcome. We’ve been helping people to successfully file their QDRO without any rejection, and we can help you too. Go ahead and give us a call, or perhaps fill our contact form to begin.
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