Certified Plan Sponsor Professional (CPSP) Practice Exam

According to regulations, what must a plan administrator do when they receive a domestic relations order?

1. Consult an attorney

2. Review it for compliance

3. File it with the IRS

4. Distribute funds immediately

The correct answer is: Review it for compliance

When a plan administrator receives a domestic relations order (DRO), it is essential for them to review the order for compliance with regulatory standards. This review process involves determining whether the DRO meets the specific requirements set forth by the Employee Retirement Income Security Act (ERISA) and the applicable pension plan's terms. The importance of this compliance check cannot be overstated. A DRO must clearly specify the rights of each party regarding the distribution of pension benefits to be considered a qualified domestic relations order (QDRO). If the order is not compliant, the plan administrator may not be able to act upon it or enforce it correctly within the plan's framework. Therefore, the administrator must ensure that the order aligns with the legal requirements and the provisions of the retirement plan before taking any further action. To contrast this with other choices, while consulting an attorney can be a prudent step, it is an action that may occur after the initial compliance review rather than a mandatory first step. Filing with the IRS is not a requirement related to the processing of a DRO; the IRS typically deals with tax implications rather than the initial handling of domestic relations orders. Distributing funds immediately is also not a standard protocol, as fund distribution should occur only after confirming compliance with the order and the plan