We are working on a QDRO and the alternate payee is demanding to have access to the participant account so she is able to "monitor" the value. I think her purpose for this is to try and time when she submits her paperwork for the distribution.

Does an alternate payee have such rights?

Thanks for your help!

1. No alternate payee until there is a QDRO -- or -- what do you mean by working on a QDRO?

2. What strange plan design/administration do you have that would cause your suspicion to make any sense?

3. The answer is negative but one has to get through so many negatives to even get to the question that the question might be in another universe in which the answer might be positive.

4. The Department of Labor might have a view on the subject, but the view is probably wrong.

1. It has been determined that the DRO is a QDRO and notices have been made. My apologies for not making it completely clear that this is a QDRO.
2. I'm confused by this response, but let me try to elaborate. The order provides for the alternate payee to receive 41.4% of the account balance as of May 2, 2011, plus $46,176, plus a pro-rata share of the gains/losses up to the date of distribution. In our exchanges about how to fill out the distribution paperwork the alternatee payee indicated that she wanted to submit the paperwork when the market was more favorable in terms of earnings. Then today she sent an email saying she must have access to the account online to monitor the account.
3. Clearly no help here.
4. All I could find is that under ERISA, an alternate payee is considered a beneficiary of the plan. As such, they have the right to request in writing copies of certain plan documents. I won't list them here, but information about or access to the participant account is not one of the items. The DOL apparently takes the opinion that once the alternate payee is in pay status, they should receive a copy of the SPD.

We always segregated the AP into a separate account. The AP would then take distribution from that separate account rather than it being issued out of the participant's account. Our plans provided that APs were restricted participants, same as beneficiaries (ie, rights to control investments and take certain distribution options but no rights to make contributions or otherwise accrue benefits).

I can't begin to think of the privacy violations of permitting her online access to the particpant's account.

See masteff's response. If the plan does not establish the alternate payee's interest as a separate account or subaccount, please explain why. Apart from the advantages of segregation, you can see one the disadvantage of not segregating in your situation. If the alternate payee has the right to determine when to take a distribution, it is reasonable for the alternate payee to be able to determine the alternate payee's balance form time to time. If the plan does not segregate, the alternate payee can't figure the alternate payee's interest. Even if the alternate payee could, the plan cannot provide a view on the alternate payee's interest if it means revealing the particpant's interest. The plan might be obligated to provide a calculation of the Alternate payee's benefit on request, and the plan does not want to perform the calculations over and over again. Segregation is possible even in annually valued plan. The alternate payee won't get the picture on her balance that she has in her mind (which is probably based on daliy valuation, but that is par for the course for everyone in annually valued plans).

Thank you for your responses! I agree that segregating would simplify the issue at hand. Unfortunately, our QDRO procedure does not require this; just keeping a separate "accounting". In this particular case there were several arguements about this on both sides and in the end it was agreed to go with the separate accounting route. This also gave rise to the latest round of arguements about the alternate payee having access to the account information.

We may want to change our QDRO procedure to require segregation in the future. When you do this, is a separate account set up for the AP at the investment company and they are allowed to choose what investments the funds go into?

We split the participant's investments proportionately. So in simple terms, if at the close of business the AP's share was 16.67% of the balance then 16.67% of each investment was transferred to an account under the AP's name and SSN. The AP would then take control of the investments.

You might start by talking to your investment company and see what backoffice processes they have in place so reality can match intent. We would actually send a QDRO split instruction letter and they would transact it at the close of business w/in one or two days. This made earnings/losses 100% current. (But that was a big investment firm, no idea what processes the smaller firms have in place.)

If you have separate accounting, then why can't you give the alternate payee access to the separate alternate payee account -- at least the account balance?

If the plan provides for participant direction of accounts, it could be dangerous to maintain participant control of the assets that are associated with the alternate payee's interest. Segregation is beneficial to the plan to avoid the obvious ugliness that can come out of the participant affecting the alternate payee's interest.

A logical approach, but be careful to read the QDRO since it might require something different.

And the plan's forms & timing for distributions also come into play here. Ours requires that they take a full distribution as soon as administratively feasible. I know others require that the funds stay in the plan until a specified event. In such cases, it makes complete sense to segregate the assets for the AP. In most cases with our plans, the AP requests a distribution as soon as the DRO is determined to be a QDRO, so a distribution is completed very quickly.

In this case I do plan on discussing the option of setting up a separate account for the AP at the investment company with the Plan Administrator. Sounds like it would reduce a lot of issues.

I dont understand why you believe that the plan should accomodate an outrageous request by an AP which could expose the plan to a lawsuit by the plan participant for failure to protect with his rights under the plan. Under 414p the AP is only entitled to amounts that are payable under a QDRO which is why the plan is supposed to segregate the amount payable to the AP when it receives the DRO. In your case the AP would be entilted to 41.4% of the account balance plus 46+k in the segregated account. This amount is separate from the participant's account. The AP is entitled to the gains and losses of this segregated amount. I dont understand why you feel that the AP is entitled any more of the gains in the participant's account just because she is asking for it. The plan can just say that it would be administrativley burdensome to recalculate her interest in any other manner and would interfere with the particpant's rights to his benefits under the plan.

As a separate matter the plan could be at risk of paying out funds which are the sole property of the participant since the plan is supposed to segregate the AP's interest from the participant's separate interest in the remaining assets in the plan when it receives the DRO. The plan cannot segregate the AP's interest from the amount in the participant's account when it receives the DRO and then at a later date when it issues a QDRO withdraw additional amounts from the Participant's account because the AP wants it. For example, if the participant terminates employment after the plan receives a DRO the plan cannot refuse to pay him the portion of benefits in his account that have not been segregated for the AP. If the plan transfers additional amounts from the participants account to the AP account after the QDRO is approved it will be open to a claim that it reduced the vested benefit payable to the participant.

By the way what is the opinion of the plan's lawyer on this issue?

Under our QDRO procedure it states that the Plan will pay the designated amounts as soon as administratively feasible, if the QDRO requires immediate payment. The procedure also states "The Plan will maintain a separate accounting (which may include a segregated account) for each alternate payee until the Plan has completed benefit payments under the QDRO."

The QDRO provides that the commencement date and form of payment to follow the terms of the Plan. Our plan only allows for lump sum distributions, as soon as administratively feasible upon the occurance of a distributable event.

Maybe I'm totally off here, but it is my understanding that based on the language in the QDRO procedure we are not required to physically segregate out the assets for the AP; we do have to do a separate accounting (on paper). We do this by running the calculations of the amounts allocable to the participant and AP as soon as we receive the distribution request from the AP. Since we usually receive the distribution paperwork in a few days, we have not had a situation like this occur before. I'm not sure I agree with you on the risk of paying out funds that are the property of the participant since the principal amounts will not change; only the time period we are calculating the earnings/losses.

Yah, but if the participant retires or dies in the meantime, you'll be a lot happier if you have a separate account for the AP.

Really, it's a lot easier for you, or whoever is in charge when the distributions start, if you create the separate account now (which among other things takes care of the earnings calcs), especially when the AP could take forever and a day to decide to take the distribution.

DmcGovern:

If the AP's interest is in a separate account which was approved under the QDRO (the 46K + 41.4%) and gains and losses attributable to that amount then there is no problem. If the AP's interest is still comingled with the participant's interest in the same account then you have a problem because the AP is a beneficiary with a right to the separate interest including making loans, designating a beneficiary, selecting investments. The AP has no right to know how the participant is investing his assets and the participant should not be investing the AP's account balance.

What I dont understand is why are you resisting placing the AP's interest in a separate account.

In working with the Plan Administrator, they initially decided that the funds would not be segregated out. It was anticipated at the time that the AP would be sending in the distribution paperwork ASAP. Even with the additional time involved, they are still reluctant to go through the paperwork and process to transfer funds to a separate account for the AP. Based on the information provided in all of the replies in this posting (and thank you all so much for the help!), I have alerted the Plan Administrator to some possible ramifications and the value of a separate account for the AP and for the participant.

I do agree with everyone - segregate it out right away and avoid these types of headaches and possible legal issues!

Good, ... and change the QDRO procedures to reflect it.