The U.S. Department of Labor (DOL) has published final regulations clarifying the rights and obligations of parties seeking to obtain benefits from certain retirement plans under qualified domestic relations orders (QDROs).
A domestic relations order (DRO) may assign some or all of a participant's benefits to a spouse, former spouse, child or other dependent, in order to satisfy child support, alimony or marital property obligations. Such a DRO will be valid for that purpose if and only if the DRO is "qualified" as provided in Employee Retirement Income Security Act (ERISA) section 206(d)(3) and Internal Revenue Code (Code) section 414(p)(3). Plan administrators have specific responsibilities and duties with respect to determining whether a DRO is qualified. The DOL's final regulations are intended to eliminate uncertainty in the process of determining if a DRO is qualified by clarifying issues relating to the timing and order of DROs. The regulations are effective on August 9, 2010.
The regulations clarify that a DRO that otherwise meets the qualification requirements will not fail to be treated as a QDRO solely because the DRO is issued after, or revises, another DRO or QDRO. The examples in the regulations illustrate this rule as applied to a subsequent DRO revising an earlier QDRO involving the same parties, as well as a subsequent DRO involving the same participant and a different alternate payee. Of course, the general QDRO requirements must be met. For example, a subsequent DRO cannot assign benefits already assigned to another alternate payee under another QDRO.
Timing of Orders
The regulations also provide that a DRO that otherwise meets the qualification requirements will not fail to be treated as a QDRO solely because of the time at which it is issued. The examples in the regulations illustrate that a DRO will not fail to be qualified solely because it is issued:
- after the death of the participant (even if no notice was provided to the plan before the participant's death),
- after the parties divorce, or
- after the participant's annuity starting date (for example, if a participant is receiving monthly payments of $1,000 over his lifetime, it may be permissible for the DRO to assign $500 of each monthly payment to the former spouse, payable over the participant's – generally not the former spouse's – lifetime).
Of course, the general QDRO requirements must be met. For example, although a DRO will not fail to be qualified solely because it is issued after the death of the participant, the DRO would fail to be qualified if it requires that the plan provide a type or form of benefit, or any option, not otherwise provided under the terms of the plan.
The DOL will be updating its handbook on QDROs in the near future. The following webpage will contain that updated handbook when it is released:www.dol.gov/EBSA/publications
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.