I'd appreciate views on a tricky situation

Underfunded DB plan (85% CL basis) restricts HCEs from (unbonded/secured) lump sum distributions as required. Principal owner gets divorced. 100% of owner's benefits assigned to ex-spouse.

Is alternate payee's benefit subject to same lump sum restrictions as owner was?

Couple of questions here: Is the ex-spouse an HCE, and what role does the QDRO assignment play? If not for the QDRO, the plan would not have allowed unrestriced payment of lump sum.

My reading of the vague regulation, after comparing it with the prior version, is that a distribution to an alternate payee of a restricted employee is subject to the restrictions on distributions to restricted employees. I recently looked for authority on this question and did not find any. Most plan documents I have seen don't explicitly address this question.

That is kind of the way I feel about this. One point: a QDRO does not create a new participant, only rights/benefits for an alternate payee, so I don't think the ex-spouse is an HCE, althought might be subject to certain HCE restrictions.

Yes, both comments are very valid and unfortunately I must agree. Thank you.

I generally start from the proposition that the alternate payee's benefits, especially in a defined benefit plan, are derivative of the participant's benefits. Unless other specific authority applies (such as the ability of a plan to make distributions to an alternate payee while the participant is still in service), restictions on the participant's benefits continue to apply to the alternate payee's benefits. The 401(a)(9) rules generally take this approach. If the general policy were otherwise, some "important" rules could be subverted by a divorce, which may or may not be a "real" divorce.

Please note that I am not responding directly to your qustion. I have not looked at the situation you decribe or the applicable rules.