Employer has received a DRO relating to a 1996 divorce action. The DRO divides the benefit as of the date of the divorce. This is a DB plan that was later converted to a cash balance plan. The DRO requests payment in the form of a lump sum. A lump sum would be permitted under the terms of the plan today, but would not have been permitted under the terms of the plan in 1996. What is the administrator to do?

If the participant would be eligible for a lump sum amount today and the order itself is in effect today, then I see no problem with allowing the Alternate payee the same payment option available to the participant. Calculate the portion of that accrued benefit was earned as of the divorce date and divide according to the order, determine the lump sum based on the participant's age as of the payout date.

I think that advice is mostly correct. Just be sure you observe all plan provisions related to the cash balance conversion, as if you were doing it concurrently, then determine the payout available at today's date.

But, the original post used the term "DRO". Before doing anything else, follow your plan's QDRO procedures to document that the DRO is (or is not) qualified, including notification to the participant. Since the plan probably issued some statement to the participant showing the CB conversion, it may be prudent to revise that statement at the time you complete the analysis of the AP portion (assuming the order is qualified).