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?

Timing Requirements for Determining Qualified Status of an Order

There is often considerable confusion about the plan administrator's time limitation for determining whether a domestic relations order qualifies as a QDRO under Code Section 414(p). Plan administrators should review QDROs in a relatively judicious and diligent manner just as they would exercise any other fiduciary duty under the plan. Unwarranted delays could cause problems for the plan. A common misconception is that the plan administrator has 18 months to determine the qualified status of an order. This is not true. An 18-month period does come into play, however, when benefits to be paid to the alternate payee under a domestic relations order are withheld from the participant's benefits and separately accounted for during the period in which a plan administrator is determining whether the order qualifies as a QDRO.

With respect to the definition of reasonable period of time, both ERISA and the Internal Revenue Code are silent on this issue. Some references in the legislative history of the Retirement Equity Act of 1984 indicate that actions taken by a plan administrator with respect to the determination as to an order's qualified status must be prudent. This essentially means that they must be consistent with the fiduciary standards imposed under ERISA. If the fiduciary has acted in accordance with such standards, the plan will be discharged from its obligations to the extent of such payments under the QDRO.

It is therefore in the best interests of the plan administrator to diligently begin the review process for domestic relations orders as soon as they are submitted. This is especially true when plan participants are already in receipt of their pension benefits. Prompt action should be taken to segregate funds and separately account for the amounts identified as payable to the alternate payee. In all likelihood, the "reasonable period" test will be a facts and circumstances determination should it ever be challenged.