403(b) / 457(b)Transactions/QDRO: Why does the TPA have to authorize the QDRO if a court has already done so?

Under Federal law, the administrator of the retirement plan that provides the benefits affected by an order is the individual (or entity) responsible for determining whether a domestic relations order is a QDRO.

Plan administrators have specific responsibilities and duties with respect to determining whether a domestic relations order is a QDRO. Plans must establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions pursuant to qualified orders. Administrators are required to follow the plan’s procedures for making QDRO determinations. Administrators also are required to furnish notice to participants and alternate payees of their receipt of a domestic relations order and to advise the plan’s procedures for determining the qualified status of such orders.

The Department of Labor has indicated that in their view a State court (or other state agency or instrumentality with the authority to issue domestic relations orders) does not have jurisdiction to determine whether an issued domestic relations order constitutes a “qualified domestic relations order.” The Department has also stated that jurisdiction to challenge a plan administrator’s decision about the qualified status of an order lies exclusively in Federal court.

Therefore, whenever a State court or other authority issues an order that recognizes, creates or assigns a right for another person to receive all or a portion of assets from a participant’s account under a 403(b) or 457 plan, the plan administrator must review and authorize the order as being “qualified” or deny it as not meeting the specifications. If there is an objection to the administrator’s decision about whether the order is qualified, then the party objecting to the decision would need to litigate their objection in Federal, not State court.

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