What obligation does a plan have to restrict payment of benefits to a participant when the plan has been put on notice that a QDRO is forthcoming? One of our clients has a plan with a participant who is about to come into pay status, but the attorney for her ex called us and told us that he will be submitting a QDRO. Does the plan have any obligation to put a hold on her benefit until the QDRO is received? Could the plan face any liability for doing so?

Plan is required to hold if it has received a domestic relations order. Department of Labor says the plan has to hold if it has a whiff of a potential QDRO. The statute and the only federal decsion on point disagree with the Department of Labor.

QDROphile, thanks for the speedy response. Is there any chance you might know the name of that decision or where to find the DOL's position?

The plan admin cant rely on just a phone call to dely paying benefits that are otherwise distributable. The attorney needs to submit a letter stating the reason for the delay with a specific time period for submitting the DRO and enclose the proposed DRO and a copy of the divorce decree or property settlement which assigns an interest in the retirement benefits to the ex. In many cases a QDRO is not necessary, for example if the employee is going to roll over the funds to an IRA the court can order that a portion of the IRA be transferred to the ex. In other cases only a portion of the benefits need to be withheld.

The PA needs to notify the employee of any delay.

The risk for the plan administrator is if the DRO is not submitted and the comencement of the participant's benefits are unreasonably delayed in violation of ERISA.

Schoonmaker (7th Cir. 1993)

Department of Labor position is informal. I can't remember if it comes out in the QDRO book, available at the EBSA web site.