If you and/or your spouse have a pension plan or a defined benefit plan, you will need a QDRO (Qualified Domestic Relations Order) if the non-employee is to receive any of the proceeds as part of your divorce settlement. The following is a list of facts from the US Department of Labor regarding Qualified Domestic Relations Orders.
U.S. Department of Labor
Employee Benefits Security Administration
What is a Qualified Domestic Relations Order?
A “qualified domestic relation order” (QDRO) is a domestic relations order that creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and that includes certain information and meets certain other requirements.
Reference: ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)
What is a “domestic relations order”?
A domestic relations order is a judgment, decree, or order (including the approval of a property settlement) that is made pursuant to state domestic relations law (including community property law) and that relates to the provision of child support, alimony payments, or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of a participant.
A state authority, generally a court, must actually issue a judgment, order, or decree or otherwise formally approve a property settlement agreement before it can be a domestic relations order under ERISA. The mere fact that a property settlement is agreed to and signed by the parties will not, in and of itself, cause the agreement to be a domestic relations order.
There is no requirement that both parties to a marital proceeding sign or otherwise endorse or approve an order. It is also not necessary that the retirement plan be brought into state court or made a party to a domestic relations proceeding for an order issued in that proceeding to be a domestic relations order or a qualified domestic relations order. Indeed, because state law is generally preempted to the extent that it relates to retirement plans, the Department takes the position that retirement plans cannot be joined as a party in a domestic relations proceeding pursuant to state law.
Moreover, retirement plans are neither permitted nor required to follow the terms of domestic relations orders purporting to assign retirement benefits unless they are QDROs.
Reference: ERISA §§ 206(d)(3)(B)(ii), 514(a), 514(b)(7); IRC § 414(p)(1)(B)
Must a domestic relations order be issued by a state court?
A domestic relations order may be issued by any state agency or instrumentality with the authority to issue judgments, decrees, or orders, or to approve property settlement agreements, pursuant to state domestic relations law (including community property law).
Reference: ERISA § 206(d)(3)(B)(ii); IRC § 414(p)(1)(B); Advisory Opinion 2001-06A.
Who can be an “alternate payee”?
A domestic relations order can be a QDRO only if it creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a part of a participant’s benefits. For purposes of the QDRO provisions, an alternate payee cannot be anyone other than a spouse, former spouse, child, or other dependent of a participant.
Reference: ERISA § 206(d)(3)(K), IRC § 414(p)(8)
What information must a domestic relations order contain to qualify as a QDRO under ERISA?
QDROs must contain the following information:
The name and last known mailing address of the participant and each alternate payee
The name of each plan to which the order applies
The dollar amount or percentage (or the method of determining the amount or
percentage) of the benefit to be paid to the alternate payee
The number of payments or time period to which the order applies
Reference: ERISA § 206(d)(3)(C)(i)-(iv); IRC § 414(p)(2)(A)-(D)
Are there other requirements that a domestic relations order must meet to be a QDRO?
There are certain provisions that a QDRO must not contain:
The order must not require a plan to provide an alternate payee or participant with any type or form of benefit, or any option, not otherwise provided under the plan
The order must not require a plan to provide for increased benefits (determined on the basis of actuarial value)
The order must not require a plan to pay benefits to an alternate payee that are required to be paid to another alternate payee under another order previously determined to be a QDRO
The order must not require a plan to pay benefits to an alternate payee in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her subsequent spouse
Reference: ERISA §§ 206(d)(3)(D)(i)-(iii), 206(d)(3)(E)(i)(III); IRC §§ 414(p)(3)(A)-(C), 414(p)(4)(A)(iii)
May a QDRO be part of the divorce decree or property settlement?
There is nothing in ERISA or the Code that requires that a QDRO (that is, the provisions that create or recognize an alternate payee’s interest in a participant’s retirement benefits) be issued as a separate judgment, decree, or order. Accordingly, a QDRO may be included as part of a divorce decree or court-approved property settlement, or issued as a separate order, without affecting its qualified status. The order must satisfy the requirements described above to be a QDRO.
Reference: ERISA § 206(d)(3)(B); IRC § 414(p)(1)
Must a domestic relations order be issued as part of a divorce proceeding to be a QDRO?
A domestic relations order that provides for child support or recognizes marital property rights may be a QDRO, without regard to the existence of a divorce proceeding. Such an order, however, must be
issued pursuant to state domestic relations law and create or recognize the rights of an individual who is an alternate payee (spouse, former spouse, child, or other dependent of a participant).
An order issued in a probate proceeding begun after the death of the participant that purports to recognize an interest with respect to retirement benefits arising solely under state community property law, but that doesn’t relate to the dissolution of a marriage or recognition of support obligations, is not a QDRO because the proceeding does not relate to a legal separation, marital dissolution, or family support obligation.
Reference: ERISA § 206(d)(3)(B); IRC § 414(p)(1); Advisory Opinion 90-46A; see Egelhoff v. Egelhoff 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001); see Boggs v. Boggs, No. 97-79 (S. Ct. June 2, 1997)
Will a domestic relations order fail to be a QDRO solely because of the timing of issuance?
No, not if it otherwise meets the QDRO requirements under ERISA. A domestic relations order issued after the participant’s death, divorce, or annuity starting date, or subsequent to an existing QDRO, will not fail to be treated as a QDRO solely because of the timing of issuance. For example, a subsequent domestic relations order between the same parties which revises an earlier QDRO does not fail to be a QDRO solely because it was issued after the first QDRO. Likewise, a subsequent domestic relations order between different parties which directs a portion of the participant’s previously unallocated benefits to a second alternate payee, does not fail to be a QDRO soley because of the existence of a previous QDRO. Further, a domestic relations order requiring a portion of a participant’s annuity benefit payments be paid to an alternate payee does not fail to be a QDRO solely because the domestic relations order was issued after the annuity starting date.
Reference: 29 C.F.R. 2530.206; see section 1001 of the Pension Protection Act of 2006, Pub. L. 109-280, 120 Stat. 780 (Aug. 17, 2006).
May a QDRO provide for payment to the guardian of an alternate payee?
If an alternate payee is a minor or is legally incompetent, the order can require payment to someone with legal responsibility for the alternate payee (such as a guardian or a party acting in loco parentis in the case of a child, or a trustee as agent for the alternate payee).
Reference: Staff of the Joint Committee on Taxation, Explanation of Technical Corrections to the Tax Reform Act of 1984 and Other Recent Tax Legislation, 100th Cong., 1st Sess. (Comm. Print 1987) at 222
Can a QDRO cover more than one plan?
A QDRO can assign rights to retirement benefits under more than one retirement plan of the same or different employers as long as each plan and the assignment of benefit rights under each plan are clearly specified.
Reference: ERISA § 206(d)(3)(C)(iv); IRC § 414(p)(2)(D)
Must all QDROs have the same provisions?
Although every QDRO must contain certain provisions, such as the names and addresses of the participant and alternate payee(s) and the name of the plan(s), the specific content of the rest of the
QDRO will depend on the type of retirement plan, the nature of the participant’s retirement benefits, the purposes behind issuing the order, and the intent of the drafting parties.
Who determines whether an order is a QDRO?
Under Federal law, the administrator of the retirement plan that provides the benefits affected by an order is the individual (or entity) initially 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. Plan administrators, as plan fiduciaries, are required to discharge their duties prudently and solely in the interest of plan participants and beneficiaries. Among other things, 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 the receipt of a domestic relations order and to furnish a copy of the plan’s procedures for determining the qualified status of such orders.
It is the view of the Department of Labor that 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. In the view of the Department, jurisdiction to challenge a plan administrator’s decision about the qualified status of an order lies exclusively in Federal court.
Reference: ERISA §§ 206(d)(3)(G)(i) and (ii), 404(a), 502(a)(3), 502(e), 514; IRC § 414(p)(6)(A)(ii)
Who is the administrator of the plan?
The administrator of an employee benefit plan is the individual or entity specifically designated in the plan documents as the administrator. If the plan documents do not designate an administrator, the administrator is the employer maintaining the plan, or, in the case of a plan maintained by more than one employer, the association, committee, joint board of trustees, or similar group representing the parties maintaining the plan. The name, address, and phone number of the plan administrator is required to be included in the plan’s summary plan description. The summary plan description is a document that the administrator is required to furnish to each participant and to each beneficiary receiving benefits. It summarizes the rights and benefits of participants and beneficiaries and the obligations of the plan.
Reference: ERISA §§ 3(16), 102(b), 29 CFR § 2520.102-3(f); IRC § 414(g), Treas. Reg. § 1.414(g)-1
Will the Department of Labor issue advisory opinions on whether a domestic relations order is a QDRO?
A determination of whether an order is a QDRO necessarily requires an interpretation of the specific provisions of the plan or plans to which the order applies and the application of those provisions to specific facts, including a determination of the participant’s actual retirement benefits under the plan(s). The Department will not issue opinions on such inherently factual matters.
Reference: ERISA Procedure 76-1, 41 Fed. Reg. 36281 (1976)