How to Avoid Common QDRO Pitfalls (Part 2)

Loan Language—Inclusion or Exclusion?

When drafting marital settlement agreement language for a defined contribution plan, it is important to consider the impact of any outstanding loan balance(s) in the Participant's account. An outstanding loan may be considered to be an asset in the Participant's account, but the obligation to repay the loan stays with the Participant and cannot be transferred to the Alternate Payee. If there is an outstanding loan balance on the account the marital settlement agreement and the QDRO should clearly indicate whether the value of the Participant's outstanding loan (as of the Valuation Date) will be included or excluded in the Participant's account balance to be divided.

Financial Advising

Click here to understand how the inclusion or exclusion of loans could impact the calculation of an award for your client.

If you have further questions regarding loan language and how it will affect your client, please contact one of our QDRO team members.

Start Preparing a QDRO Today