§ 35.07 PAYMENT UPON DEATH OF ALTERNATE PAYEE OR PARTICIPANT

• Jurisdiction: Washington

§ 35.07 PAYMENT UPON DEATH OF ALTERNATE PAYEE OR PARTICIPANT

Neither the Code nor ERISA addresses the issue of who will receive the alternate payee's plan interest in the event the alternate payee dies prior to the plan's completion of all payments under the QDRO. However, IRS regulations suggest that the alternate payee should have the same right as the participant to designate a beneficiary for any benefits assigned to the alternate payee. Treas. Reg. § 1.401(a)-13(g)(4)(iii)(B).

Although there is no statutory requirement that the parties indicate what will happen upon the death of the participant or alternate payee, the plan administrator must know how to administer the QDRO upon the death of the parties. The QDRO should address what will happen if the participant dies before or after the commencement of benefits, as well as what will happen if the alternate payee dies before or after the commencement of benefits. The survivorship rules, if applicable to the plan, must be considered in determining the options available at the death of either party.

[1] Participant's Death

Continuation of payments after the participant's death will depend on the type of QDRO, the form of payment, and the terms of the plan.

[a] Shared-Payment QDRO

In general, if the alternate payee is to receive a certain amount from each distribution the participant receives, then when the participant dies, current payments to the alternate payee will cease unless the form of benefit selected provides for continued payments (e.g., a single life annuity, with a term certain).

[b] Separate-Interest QDRO

In general, the death of the participant will not affect the separate interest of an alternate payee. However, if the form of benefit is based on a life expectancy (e.g., an annuity), it should be based on the alternate payee's life expectancy if the intent is to have payments made throughout the alternate payee's life expectancy. On the other hand, if the participant is older than the alternate payee and payments are based on the participant's life expectancy, benefits payments will be larger but benefits will terminate on the participant's death. This actuarial adjustment for age ensures that the alternate payee will not receive a larger benefit than permitted by the plan.

The QDRO may also name the alternate payee who is the spouse or former spouse of the participant as the "surviving spouse" for all or part of the participant's benefit (the separate interest awarded to the...