Time and Order of Issuance of
Domestic Relations Orders
[03/07/2007]
Volume 72, Number 44, Page 10070-10074
[Federal Register: March 7, 2007 (Volume 72, Number 44)]
[Rules and Regulations]
[Page 10070-10074]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07mr07-11]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2530
RIN 1210-AB15
Interim Final Rule Relating to Time and Order of Issuance of
Domestic Relations Orders
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This document contains an interim final rule issued under
section 1001 of the Pension Protection Act of 2006, Public Law 109-280
(PPA), which requires the Secretary of Labor to issue, not later than 1
year after the date of the enactment of the PPA, regulations clarifying
certain issues relating to the timing and order of domestic relations
orders under section 206(d)(3) of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). The rule contained in this
document provides guidance to plan administrators, service providers,
participants, and alternate payees on the qualified domestic relations
order (QDRO) requirements under ERISA. The rule is being adopted in
response to the specific statutory directive contained in the PPA.
Interested persons are invited to submit comments on the interim final
rule for consideration by the Department of Labor in developing a final
rule.
DATES: Effective date: The interim final rule is effective on April 6,
2007. Comment date: Written comments on the interim final rule must be
received by May 7, 2007.
ADDRESSES: To facilitate the receipt and processing of comments, EBSA
encourages interested persons to submit their comments electronically
to e-ORI@dol.gov, or by using the Federal eRulemaking portal http://www.regulations.gov
(follow instructions for submission of comments).
Persons submitting comments electronically are encouraged not to submit
paper copies. Persons interested in submitting comments on paper should
send or deliver their comments (preferably three copies) to: Office of
Regulations and Interpretations, Employee Benefits Security
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210, Attention: QDRO Regulation. All
comments will be available to the public, without charge, online at
http://www.regulations.gov and http://www.dol.gov/ebsa, and at the
Public Disclosure Room, Employee Benefits Security Administration, U.S.
Department of Labor, Room N-1513, 200 Constitution Avenue, NW.,
Washington, DC 20210.
FOR FURTHER INFORMATION CONTACT: Yolanda R. Wartenberg, Office of
Regulations and Interpretations, Employee Benefits Security
Administration, U.S. Department of Labor, Washington, DC 20210, (202)
693-8510. This is not a toll free number.
SUPPLEMENTARY INFORMATION:
A. Qualified Domestic Relations Order Provisions
Section 206(d)(3) of title I of ERISA, and the related provisions
of section 414(p) of the Internal Revenue Code of 1986 (Code),
establish a limited exception to the prohibitions against assignment
and alienation contained in ERISA section 206(d)(1) and Code section
401(a)(13).\1\ Under this limited exception, a participant's benefits
under a pension plan may be assigned to an alternate payee, defined as
the participant's spouse, former spouse, child, or other dependent,
pursuant to an order that constitutes a qualified domestic relations
order (QDRO) within the meaning of those provisions. Such QDROs, in
addition, survive the federal preemption of State law imposed by ERISA
section 514(a) by virtue of ERISA section 514(b)(7).
---------------------------------------------------------------------------
\1\ The QDRO provisions were added to ERISA and the Code by the
Retirement Equity Act of 1984 (REA), Public Law 96-397, 96 Stat.
1438 (1984). Except where no corresponding provision exists, all
references to paragraphs of ERISA section 206(d)(3) should be read
to refer to corresponding provisions of Code section 414(p). The
Secretary of Labor has authority to interpret the QDRO provisions,
section 206(d)(3), and its parallel provision at section 414(p) of
the Code, and to issue QDRO regulations in consultation with the
Secretary of the Treasury. 29 U.S.C. 1056(d)(3)(N). The Secretary of
the Treasury has authority to issue rules and regulations necessary
to coordinate the requirements of section 414(p) (and the
regulations issued by the Secretary of Labor thereunder) with the
other provisions of Chapter I of Subtitle A of the Code. 26 U.S.C.
401(n). The Secretary of the Treasury has been consulted on this
interim final rule.
---------------------------------------------------------------------------
Pursuant to the QDRO provisions, a plan administrator must
determine, in accordance with specified procedures, whether an order
purporting to divide a participant's benefits under a plan meets the
applicable requirements set forth in section 206(d)(3) of ERISA. If the
plan administrator determines that the order meets these requirements
and is, accordingly, a QDRO within the meaning of section 206(d)(3),
the plan administrator must distribute the assigned portion of the
participant's benefits to the alternate payee or payees named in the
order in accordance with the terms of the order.
Subparagraphs (G) and (H) of ERISA section 206(d)(3) set forth
provisions relating to the procedures that a plan must establish, and a
plan administrator must observe, in determining whether an order is a
QDRO and in administering the plan and the participant's benefits
during the period in which the plan administrator is making such a
determination. The plan's procedures must be reasonable, must be in
writing, must require prompt notification and disclosure of the
procedures to participants and alternate payees upon receipt of an
order, and must permit alternate payees to designate representatives
for notice purposes. In addition, the plan administrator must complete
the determination process and notify participants and alternate payees
of its determination within a reasonable period after receipt of the
order.
Subparagraph (H) of section 206(d)(3) provides specific procedural
protection of a potential alternate payee's interest in a participant's
benefits during the plan's determination process and for a period of up
to 18 months (the 18-month period) during which the issue of the
qualified status of a domestic relations order is being determined--
whether by the plan administrator, by a court of competent
jurisdiction, or
[[Page 10071]]
otherwise. During the 18-month period, a plan administrator must
separately account for any amounts that would have been payable to the
alternate payee if the order had been immediately treated as a QDRO and
must pay these amounts (including any interest thereon) to the
alternate payee if the order is deemed qualified within such period. If
the issue as to whether the order is a QDRO is not resolved within the
18-month period, the plan administrator is to pay such amounts to the
person or persons who would have been entitled to the amounts if there
had been no order. Any determination that an order is a QDRO that is
made after the close of the 18-month period is to be applied
prospectively only.
If a plan fiduciary, acting in accordance with the fiduciary
responsibility provisions of part 4 of title I of ERISA, treats an
order as a QDRO (or determines that such an order is not a QDRO) and
distributes benefits in accordance with that determination, paragraph
(I) of section 206(d)(3) provides that the obligations of the plan and
its fiduciaries to the affected participants and alternate payees with
respect to the distribution shall be treated as discharged.
The QDRO provisions detail specific requirements that an order must
satisfy in order to constitute a QDRO. The order must be a ``domestic
relations order'' issued pursuant to a State domestic relations law
(including a community property law) that relates to the provision of
child support, alimony payments, or marital property rights to a
spouse, former spouse, child, or other dependent of a participant.
Section 206(d)(3)(B)(ii). It must create or recognize the existence of
an alternate payee's right to receive all or a portion of the benefits
payable to a participant under a plan. Section 206(d)(3)(B)(i).
Further, it must clearly specify the name and last known mailing
address (if any) of the participant and the name and mailing address of
each alternate payee covered by the order; the amount or percentage of
the participant's benefits to be paid by the plan(s) to each such
alternate payee, or the manner in which such amount or percentage is to
be determined; the number of payments or period to which the order
applies; and each plan to which the order applies. Section
206(d)(3)(C). An order will fail to be a QDRO, however, if it requires
the plan to provide any type or form of benefit, or any option, not
otherwise provided under the plan; to provide increased benefits
determined on the basis of actuarial value; or 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. Section
206(d)(3)(D).
B. Pension Protection Act of 2006
Under section 1001 of the Pension Protection Act of 2006 (PPA),
Public Law 109-280, section 1001, 120 Stat. 780 (2006), Congress
instructed the Secretary of Labor to issue regulations, not later than
1 year after the date of the enactment, under section 206(d)(3) of
ERISA and section 414(p) of the Code, to clarify that--(1) a domestic
relations order otherwise meeting the requirements to be a QDRO,
including the requirements of section 206(d)(3)(D) of ERISA and section
414(p)(3) of the Code, shall not fail to be treated as a QDRO solely
because--(A) the order is issued after, or revises, another domestic
relations order or QDRO; or (B) of the time at which it is issued.
Section 1001 of the PPA also requires that the regulations clarify that
such orders are subject to all of the same requirements and protections
that apply to QDROs, including the provisions of section 206(d)(3)(H)
of ERISA and section 414(p)(7) of the Code.
C. Overview of Interim Final Rule
Scope of the Regulation
Paragraph (a) of the regulation provides that the scope of the
regulation is to implement the directive contained in section 1001 of
the PPA to clarify certain timing issues with respect to domestic
relations orders and qualified domestic relations orders under ERISA.
Subsequent Domestic Relations Orders
Paragraph (b)(1) of the regulation provides that a domestic
relations order otherwise meeting ERISA's requirements to be a QDRO
shall not fail to be treated as a QDRO solely because the order is
issued after, or revises, another domestic relations order or QDRO.
Paragraph (b)(2) provides examples of this rule.\2\ Example 1
illustrates this rule as applied to a subsequent order revising an
earlier QDRO involving the same parties. Example 2 illustrates this
rule in the context of a subsequent order involving the same
participant and a different alternate payee.
---------------------------------------------------------------------------
\2\ The examples in paragraphs (b)(2), (c)(2) and (d)(2) of the
regulation show how the rules in paragraphs (b)(1), (c)(1) and
(d)(1), respectively, apply to specific facts. They do not represent
the only circumstances for which these rules would provide
clarification.
---------------------------------------------------------------------------
Timing of Domestic Relations Order
Paragraph (c)(1) of the regulation provides that a domestic
relations order otherwise meeting ERISA's requirements to be a QDRO
shall not fail to be treated as a QDRO solely because of the time at
which it is issued. Paragraph (c)(2) provides examples of this rule.
Example 1 illustrates the principle that a domestic relation order will
not fail to be a QDRO solely because it is issued after the death of
the participant. Example 2 illustrates that a domestic relation order
will not fail to be a QDRO solely because it is issued after the
parties divorce. Example 3 illustrates that an order would not fail to
be a QDRO solely because it is issued after the participant's annuity
starting date.
Requirements and Protections
Paragraph (d)(1) of the regulation provides that any domestic
relations order described in paragraph (b) or (c) of the regulation
shall be subject to the same requirements and protections that apply to
all QDROs under section 206(d)(3) of ERISA. Paragraph (d)(2) provides
examples of this rule. Example 1 illustrates that, although an order
will not fail to be a QDRO solely because it is issued after the death
of the participant, the order would fail to be a QDRO if it requires
the plan to provide a type or form of benefit, or any option, not
otherwise provided under the plan. Example 2 illustrates application of
the protective rules regarding segregation of payable benefits to a
second order involving the same participant and alternate payee.
Example 3 illustrates that, although an order will not fail to be a
QDRO solely because it is issued after another QDRO, the order would
fail to be a QDRO if it assigns benefits already assigned to another
alternate payee under another QDRO.
D. Effective Date
The interim final regulation will be effective 30 days after the
date of publication in the Federal Register. The guidance provided by
the interim final regulation is in response to the direction from
Congress in section 1001 of the PPA to the Secretary of Labor to issue
regulations to clarify current law under section 206(d)(3) of ERISA.
The Department, therefore, has determined it is necessary and
appropriate to proceed with an interim final rule to provide the
clarification mandated by Congress, while also requesting public
comments on the matter for the purpose of drafting a final rule.
E. Justification for Interim Final Rulemaking
This regulation incorporates, with minor changes, language in
section 1001 of the Pension Protection Act. The changes do not modify
the meaning of
[[Page 10072]]
the statutory language. In the Department's view, Congress directed the
Secretary to adopt the substance of this language as a clarification of
current law. In issuing these regulations, the Secretary has not
deviated from the narrow Congressional directive. The examples included
in the regulation merely provide interpretive guidance by explaining
how the statutory language would apply to particular facts. Therefore,
in accordance with section 553(b) of the Administrative Procedure Act,
5 U.S.C. 553(b), the Department finds for good cause that notice and
public procedure on this regulation is unnecessary. To the extent that
the examples go beyond the statutory language, they are purely
interpretive and are not subject to the notice and public procedure
requirements of section 553(b).
F. Request for Comments
The Department invites comments from interested persons on all
aspects of the interim final rule, including whether, and to what
extent, there are additional factual scenarios that should be added to
the examples already in the interim final rule. To facilitate the
receipt and processing of comments, EBSA encourages interested persons
to submit their comments electronically by e-mail to e-ORI@dol.gov, or
by using the Federal eRulemaking portal at http://www.regulations.gov
(follow instructions for submission of comments). Persons submitting
comments electronically are encouraged not to submit paper copies.
Persons interested in submitting comments on paper should send or
deliver their comments (preferably three copies) to: Office of
Regulations and Interpretations, Employee Benefits Security
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210, Attention: QDRO Regulation. All
comments will be available to the public, without charge, online at
http://www.regulations.gov and http://www.dol.gov/ebsa, and at the
Public Disclosure Room, Employee Benefits Security Administration, U.S.
Department of Labor, Room N-1513, 200 Constitution Avenue, NW.,
Washington, DC, 20210.
G. Regulatory Impact Analysis
Executive Order 12866 Statement
Under Executive Order 12866 (58 FR 51735), the Department must
determine whether a regulatory action is ``significant'' and therefore
subject to review by the Office of Management and Budget (OMB). Section
3(f) of the Executive Order defines a ``significant regulatory action''
as an action that is likely to result in a rule (1) having an annual
effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
``economically significant''); (2) creating serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order. The Department has determined that
this regulatory action is not economically significant within the
meaning of section 3(f)(1) the Executive Order. However, the Office of
Management and Budget (OMB) has determined that the action is
significant within the meaning of section 3(f)(4) of the Executive
Order, and the Department accordingly provides the following assessment
of its potential costs and benefits.
This interim final rule is intended to clarify the statutory
requirements for QDROs under section 206(d)(3) of ERISA and section
414(p) of the Code. The provisions of section 206(d)(3) generally
assist State authorities in deciding permissible ways in which pension
benefits may be divided in domestic relations matters. The rules and
processes under section 206(d)(3) make it possible for plan
administrators to determine whether a State order seeking to assign
pension benefits to an alternate payee should be given effect under the
plan; clear rules concerning what constitutes a QDRO have the effect of
assisting plan administrators in reviewing orders received by the plan,
as well as participants and alternate payees in planning how to take
pension assets into account when significant events require making a
division of marital assets.
In directing the Department, in section 1001 of the Pension
Protection Act, to clarify the application of the QDRO provisions,
Congress expressed the view that existing uncertainty about the
application of those provisions has caused difficulties meriting
resolution through regulatory action. Uncertainty concerning the
application of the QDRO provisions can impose litigation and other
costs on plans, participants, and alternate payees, as well as on State
domestic relations authorities, that will be reduced through the
promulgation of this rule. Consistent with the view of Congress, the
rule clarifies, first, that the sequence in which multiple orders may
be issued does not in itself affect whether the orders are QDROs, and,
second, that the time at which an order is issued does not, in itself,
determine whether an order is or is not a QDRO. The rule further
reiterates that an order must meet the specific requirements of
sections 206(d)(3) of ERISA and section 414(p) of the Code.
By reducing uncertainty over the application of the statutory
requirements in specific circumstances, the rule is expected to reduce
costs that might otherwise arise from the necessity of resolving
uncertainty in such circumstances. By providing clearer rules for plan
administrators, the rule is also expected to increase the efficiency of
plan administration. In addition, the Department is issuing this rule
in direct response to a Congressional directive. As described above,
section 1001 of the Pension Protection Act requires the Department to
issue regulations clarifying that an order otherwise meeting the
requirements of section 206(d)(3) of ERISA for a QDRO should not fail
to be treated as a QDRO solely because it was issued after or revised
another order, or because of the time at which it was issued. In
issuing this interim final rule, therefore, the Department is
fulfilling objectives expressly endorsed by Congress. Because the rule
applies only in certain specific circumstances and affects only a small
subset of domestic relations orders, the Department believes that its
economic impact will be small, overall, but positive.
The rule is not anticipated to impose increased compliance costs,
since it merely establishes the legal effect of certain sequences of
events. Although it may cause some orders to be treated as QDROs that
otherwise might be disputed (or fail to be treated as a QDRO), the rule
provides certainty with respect to the circumstances it covers, which
will aid State authorities seeking to divide pension benefits and
assist plan administrators seeking to discharge their obligations under
section 206(d)(3) of ERISA, without limiting the power of State
authorities to determine the proper division of marital assets. The
rule is expected generally to provide benefits to pension plans, plan
participants and alternate payees, and State domestic relations
authorities by increasing the clarity of the rules that apply to QDROs.
Based on the foregoing assessment, the Department concludes that
promulgation of this interim final rule
[[Page 10073]]
will provide substantial benefits without imposing major costs.
Paperwork Reduction Act
The interim final regulation being issued here is not subject to
the requirements of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501
et seq.) because it does not contain an ``information collection'' as
defined in 44 U.S.C. 3502 (11).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a proposed rule will not have
a significant economic impact on a substantial number of small
entities, section 603 of the RFA requires that the agency present an
initial regulatory flexibility analysis at the time of the publication
of the notice of proposed rule-making describing the impact of the rule
on small entities and seeking public comment on such impact. Because
this rule is being issued as an interim final rule, the RFA does not
apply and the Department is not required to either certify that the
rule will not have a significant impact on a substantial number of
small businesses or conduct an initial regulatory flexibility analysis.
Nevertheless, the Department has considered the likely impact of the
interim rule on small entities in connection with its assessment under
Executive Order 12866, described above, and believes this rule will not
have a significant impact on a substantial number of small entities.
For purposes of this discussion, the Department deemed a small entity
to be an employee benefit plan with fewer than 100 participants. The
basis of this definition is found in section 104(a)(2) of ERISA, which
permits the Secretary of Labor to prescribe simplified annual reports
for pension plans which cover fewer than 100 participants. The
Department invites comments on the effect of the interim final rule on
small entities.
Congressional Review Act
The interim final rule being issued here is subject to the
Congressional Review Act provisions of the Small Business Regulatory
Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and will be
transmitted to Congress and the Comptroller General for review. The
interim final rule is not a ``major rule'' as that term is defined in 5
U.S.C. 804, because it does not result in (1) an annual effect on the
economy of $100 million or more; (2) a major increase in costs or
prices for consumers, individual industries, or federal, State, or
local government agencies, or geographic regions; or (3) significant
adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), the interim final rule does not include any federal mandate
that may result in expenditures by State, local, or tribal governments,
or impose an annual burden exceeding $100 million on the private
sector.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires federal agencies to adhere to
specific criteria in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. This interim final rule does not have
federalism implications because it has no substantial direct effect on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Section 514 of ERISA provides, with
certain exceptions specifically enumerated, that the provisions of
titles I and IV of ERISA supersede any and all laws of the States as
they relate to any employee benefit plan covered under ERISA. One
exception described in section 514(b)(7) is for qualified domestic
relations orders, as defined in section 206(d)(3) of ERISA. The interim
rule does not alter the provisions of the statute, but merely clarifies
the status of certain types of domestic relations orders under ERISA.
List of Subjects in 29 CFR Part 2530
Alternate payee, Divorce, Domestic relations orders, Employee
benefit plans, Marital property, Pensions, Plan administrator,
Qualified domestic relations orders, Spouse.
0
For the reasons set forth in the preamble, the Department amends
Subchapter D, Part 2530 of Title 29 of the Code of Federal Regulations
as follows:
Subchapter D--Minimum Standards for Employee Pension Benefit Plans
Under the Employee Retirement Income Security Act of 1974
PART 2530--RULES AND REGULATIONS FOR MINIMUM STANDARDS FOR EMPLOYEE
PENSION BENEFIT PLANS
0
1. The authority citation for part 2530 is revised to read as follows:
Authority: Secs. 201, 202, 203, 204, 210, 505, 1011, 1012, 1014,
and 1015, Pub. L. 93-406, 88 Stat. 852-862, 866-867, 894, 898-913,
924-929 (29 U.S.C. 1051-4, 1060, 1135, 26 U.S.C. 410, 411, 413,
414); Secretary of Labor's Order No. 13-76. Section 2530.206 also
issued under sec. 1001, Pub. L. 109-280, 120 Stat. 780.
0
2. Add Sec. 2530.206 to read as follows:
Sec. 2530.206 Time and order of issuance of domestic relations
orders.
(a) Scope. This section implements section 1001 of the Pension
Protection Act of 2006 by clarifying certain timing issues with respect
to domestic relations orders and qualified domestic relations orders
under the Employee Retirement Income Security Act of 1974, as amended
(ERISA), 29 U.S.C. 1001 et seq.
(b) Subsequent domestic relations orders. (1) Subject to paragraph
(d)(1) of this section, a domestic relations order shall not fail to be
treated as a qualified domestic relations order solely because the
order is issued after, or revises, another domestic relations order or
qualified domestic relations order.
(2) The rule described in paragraph (b)(1) of this section is
illustrated by the following examples:
Example (1). Subsequent domestic relations order between the
same parties. Participant and Spouse divorce, and the administrator
of Participant's 401(k) plan receives a domestic relations order.
The administrator determines that the order is a QDRO. The QDRO
allocates a portion of Participant's benefits to Spouse as the
alternate payee. Subsequently, before benefit payments have
commenced, Participant and Spouse seek and receive a second domestic
relations order. The second order reduces the portion of
Participant's benefits that Spouse was to receive under the QDRO.
The second order does not fail to be treated as a QDRO solely
because the second order is issued after, and reduces the prior
assignment contained in, the first order.
Example (2). Subsequent domestic relations order between
different parties. Participant and Spouse divorce, and the
administrator of Participant's 401(k) plan receives a domestic
relations order. The administrator determines that the order is a
QDRO. The QDRO allocates a portion of
[[Page 10074]]
Participant's benefits to Spouse as the alternate payee. Participant
marries Spouse 2, and then they divorce. Participant's 401(k) plan
administrator subsequently receives a domestic relations order
pertaining to Spouse 2. The order assigns to Spouse 2 a portion of
Participant's 401(k) benefits not already allocated to Spouse 1. The
second order does not fail to be a QDRO solely because the second
order is issued after the plan administrator has determined that an
earlier order pertaining to Spouse 1 is a QDRO.
(c) Timing. (1) Subject to paragraph (d)(1) of this section, a
domestic relations order shall not fail to be treated as a qualified
domestic relations order solely because of the time at which it is
issued.
(2) The rule described in paragraph (c)(1) of this section is
illustrated by the following examples:
Example (1). Orders issued after death. Participant and Spouse
divorce, and the administrator of Participant's plan receives a
domestic relations order, but the administrator finds the order
deficient and determines that it is not a QDRO. Shortly thereafter,
Participant dies while actively employed. A second domestic
relations order correcting the defects in the first order is
subsequently submitted to the plan. The second order does not fail
to be treated as a QDRO solely because it is issued after the death
of the Participant.
Example (2). Orders issued after divorce. Participant and Spouse
divorce. As a result, Spouse no longer meets the definition of
``surviving spouse'' under the terms of the plan. Subsequently, the
plan administrator receives a domestic relations order requiring
that Spouse be treated as the Participant's surviving spouse for
purposes of receiving a death benefit payable under the terms of the
plan only to a participant's surviving spouse. The order does not
fail to be treated as a QDRO solely because, at the time it is
issued, Spouse no longer meets the definition of a ``surviving
spouse'' under the terms of the plan.
Example (3). Orders issued after annuity starting date.
Participant retires and commences benefit payments in the form of a
straight life annuity, with respect to which Spouse waives the
surviving spousal rights provided under the plan and section 205 of
ERISA. Participant and Spouse divorce after Participant's annuity
starting date and present the plan with a domestic relations order
providing for Spouse, as alternate payee, to receive half of the
benefit payments that are made to Participant after a specified
future date. Pursuant to paragraph (c)(1) of this section, the order
does not fail to be a QDRO solely because it is issued after the
annuity starting date.
(d) Requirements and protections. (1) Any domestic relations order
described in this section shall be subject to the same requirements and
protections that apply to qualified domestic relations orders under
section 206(d)(3) of ERISA.
(2) The rule described in paragraph (d)(1) of this section is
illustrated by the following examples:
Example (1). Type or form of benefit. Participant and Spouse
divorce, and their divorce decree provides that the parties will
prepare a domestic relations order assigning 50 percent of
Participant's benefits under a 401(k) plan to Spouse to be paid in
monthly installments over a ten-year period. Shortly thereafter,
Participant dies while actively employed. A domestic relations order
consistent with the decree is subsequently submitted to the 401(k)
plan; however, the plan does not provide for ten-year installment
payments of the type described in the order. Pursuant to paragraph
(c)(1) of this section, the order does not fail to be treated as a
QDRO solely because it is issued after the death of Participant, but
the order would fail to be a QDRO under section 206(d)(3)(D)(i) and
paragraph (d)(1) of this section because the order requires the plan
to provide a type or form of benefit, or any option, not otherwise
provided under the plan.
Example (2). Segregation of payable benefits. Participant and
Spouse divorce, and the administrator of Participant's plan receives
a domestic relations order under which Spouse would begin to receive
benefits immediately if the order is determined to be a QDRO. The
plan administrator separately accounts for the amounts covered by
the domestic relations order as is required under section
206(d)(3)(H)(v) of ERISA. The plan administrator finds the order
deficient and determines that it is not a QDRO. Subsequently, after
the expiration of the segregation period pertaining to that order,
the plan administrator receives a second domestic relations order
relating to the same parties under which Spouse would begin to
receive benefits immediately if the second order is determined to be
a QDRO. Notwithstanding the expiration of the first segregation
period, the amounts covered by the second order must be separately
accounted for by the plan administrator for an 18-month period, in
accordance with section 206(d)(3)(H) of ERISA and paragraph (d)(1)
of this section.
Example (3). Previously assigned benefits. Participant and
Spouse divorce, and the administrator of Participant's 401(k) plan
receives a domestic relations order. The administrator determines
that the order is a QDRO. The QDRO assigns a portion of
Participant's benefits to Spouse as the alternate payee. Participant
marries Spouse 2, and then they divorce. Participant's 401(k) plan
administrator subsequently receives a domestic relations order
pertaining to Spouse 2. The order assigns to Spouse 2 a portion of
Participant's 401(k) benefits already assigned to Spouse 1. The
second order does not fail to be treated as a QDRO solely because
the second order is issued after the plan administrator has
determined that an earlier order pertaining to Spouse 1 is a QDRO.
The second order, however, would fail to be a QDRO under section
206(d)(3)(D)(iii) and paragraph (d)(1) of this section because it
assigns all or a portion of Participant's benefits that are already
assigned to Spouse 1 by the prior QDRO.
Signed at Washington, DC, this 28th day of February, 2007.
Bradford P. Campbell,
Acting Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. E7-3820 Filed 3-6-07; 8:45 am]
BILLING CODE 4510-29-P
|
