A DRO is received for a participant in a 457(B) deferred compensation plan. The order stipulates that the alternate payee receive 50% of the participant's account balance as of 3/30/99. The plan was converted from another recordkeeper on 7/1/00. The prior recordkeeper will not provide the current recordkeeper with the account balance as of 3/30/99. In addition to that, the account balance at the time of conversion was $250,000. Today it is valued at $85,000. The participant has not taken any distributions. Also, the action for divorce commenced on 3/30/99 and was settled on 10/24/01.

How do we determine the amount due the alternate payee? Do we split the account based on the current account balance? Is there any regulatory guidance on how to split accounts when there has been a decline in the market value?

Is this a governmental plan? What does the plan have to say about compliance with domestic relations orders? In the case of a private plan subject to ERISA, only compliance with a qualified domestic relations order is required, and a qualified domestic relations order cannot require the payment of more than the total account balance. Many state or local laws or plan documents dealing with 457 plans follow a similar approach.

In any event, in most instances it is best not to try to figure out on your own what the court would have meant if it had considered this situation. You might consider notifying whoever sent you the domestic relations order of the terms of the plan and applicable law governing domestic relations orders, and that (presumably) this order does not satisfy them. At that point, it is up to the party to come up with an order that provides you with the necessary guidance.

This is a governmental plan. The plan definition for "Plan Certified Domestic Relations Order" says that the order must meet the requirements of the Plan and of a qualified domestic relations order under 414(p).

Any chance that there is another part of the order stating that the amount is adjusted for subsequent gains/losses ?

Yes. The order specifies that the amount awarded will be credited with earnings and losses from 3/31/99 until distributed.