IRC section 414(p)(4)(A)(iii) provides as follows:

"A domestic relations order shall not be treated as failing to meet the requirements of
subparagraph (A) of paragraph (3) solely because such order requires that payment of benefits
be made to an alternate payee ... (iii) in any form in which such benefits may be paid under the plan to the participant
(other than in the form of a joint and survivor annuity with respect to the alternate payee
and his or her subsequent spouse)."

I represent a potential AP who is a child due back child support payments. The P's benefits are currently in a DB plan. The terms of the plan provide for an optional lump sum payment in the event that the amount of benefits payable is less than $25,000. The Plan Administrator has informed me that a QDRO transferring an amount to an AP that is less than $25,000 will not be eligible for the lump sum payment option because the total benefits payable to the P exceed $25,000.

My understanding of the IRC section above is that the AP should have the right to elect any payment option that would be available to the P with respect to "such benefits" - the benefits transferred to the AP. The AP essentially is treated as a P and is entitled to make elections as any P would be with respect to the benefits due the AP.

Any information or clarification about this issue would be greatly appreciated.

Barring someone pointing out authority that cuts contrary, I think the Plan Administrator is within its rights to so apply the $25,000 threshold in this way. From the plan's perspective, the AP is an alternate payee of a portion of the P's benefits. It is just that the awarded benefits portion is payable to the AP instead of to the P. Under a different part of the QDRO statutes, the awarded benefits are not available to the AP until the P reaches the age under the plan that if no longer employed benefits payout could commence to the P; P's age continues to have a bearing on when the awarded benefits are payable.