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Congress conditioned an alternate payee's right to an
assignment of a participant's pension benefit on the prospective alternate
payee's obtaining a domestic relations order that satisfies specific
informational and other requirements. It is the view of the department
that Congress therefore intended prospective alternate payees -- spouses,
former spouses, children, and other dependents of a participant who are
involved in a domestic relations proceedings -- to have access to plan and
participant benefit information sufficient to prepare a QDRO. Such
information might include the summary plan description, relevant plan
documents, and a statement of the participant's benefit entitlements.
The department believes that Congress did not intend to
require prospective alternate payees to submit a domestic relations order
to the plan as a prerequisite to establishing the prospective alternate
payee's rights to information in connection with a domestic relations
proceeding. However, it is the view of the department that a plan
administrator may condition disclosure of such information on a
prospective alternate payee's providing information sufficient to
reasonably establish that the disclosure request is being made in
connection with a domestic relations proceeding.
It is the department's understanding that many domestic
relations orders fail initially to qualify when submitted to the plan
because they fail to take into account the plan's provisions or the
participant's actual benefit entitlements. Affording prospective alternate
payees access to plan and participant information in a timely manner will,
in the view of the department, help drafters avoid making such obvious
errors in preparing orders and, thereby, facilitate plan administration.
Reference: ERISA §§ 206(d)(3)(A) - (C), 404(a); IRC
§ 414(p)(1) - (3)
Upon receipt of a domestic relations order, the plan
administrator is required to promptly notify the affected participant and
each alternate payee named in the order of the receipt of the order and to
provide a copy of the plan's procedures for determining whether a domestic
relations order is a QDRO. Notification should be sent to the address
included in the domestic relations order.
The administrator is required to determine whether the
order is a QDRO within a reasonable period of time after receipt of a
domestic relations order and to promptly notify the participant and each
alternate payee of such determination.
Reference: ERISA § 206(d)(3)(G)(i); IRC §
414(p)(6)(A)
Every pension plan is required to establish written
procedures for determining whether domestic relations orders are QDROs and
for administering distributions under QDROs.
Reference: ERISA § 206(d)(3)(G)(ii); IRC §
414(p)(6)(B)
The QDRO procedures must:
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Be in writing
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Be reasonable
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Provide that each person specified in a domestic
relations order received by the plan as entitled to payment of
benefits under the plan will be notified (at the address specified in
the domestic relations order) of the plan's procedures for making QDRO
determinations upon receipt of a domestic relations order
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Permit an alternate payee to designate a
representative for receipt of copies of notices and plan information
that are sent to the alternate payee with respect to a domestic
relations orders
Reference: ERISA § 206(d)(3)(G)(ii); IRC § 414(p)(6)
It is the view of the Department of Labor that a plan's
QDRO procedures should be designed to ensure that QDRO determinations are
made in a timely, efficient, and cost-effective manner, consistent with
the administrator's fiduciary duties under ERISA. The department believes
that unnecessary administrative burdens and costs attendant to QDRO
determinations and administration can be avoided with clear explanations
of the plan's determination process, including:
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An explanation of the information about the plan
and benefits that is available to assist prospective alternate payees
in preparing QDROs, such as summary plan descriptions, plan documents,
individual benefit and account statements, and any model QDROs
developed for use by the plan
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A description of any time limits set by the plan
administrator for making determinations
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A description of the steps the administrator will
take to protect and preserve pension assets or benefits upon receipt
of a domestic relations order (for example, a description of when and
under what circumstances plan assets will be segregated or benefit
payments will be delayed or suspended)
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A description of the process provided under the
plan for obtaining a review of the administrator's determination as to
whether an order is a QDRO
It is the view of the department that the plan
administrator's adoption and use of clear QDRO procedures, coupled with
the administrator's provision of information about the plan and benefits
upon request, will significantly reduce the difficulty and expense of
obtaining and administering QDROs by minimizing confusion and uncertainty
about the process.
Reference: ERISA §§ 206(d)(3)(G), 206(d)(3)(H),
404(a); IRC §§ 414(p)(6), 414(p)(7)
The department has taken the position
that in the context of a defined contribution plan, an administrator may assess reasonable expenses attributable to a QDRO determination against the individual account of the participant who is a party to the domestic relations order. The document of the plan should be
reviewed to determine how plan expenses are
allocated.
Reference: ERISA § 404(a): see Field Assistance
Bulletin 2003-3
Although they are not required to do so, plan
administrators may develop and make available model QDRO forms to assist
in the preparation of a QDRO. Such model forms may make it easier for the
parties to prepare a QDRO and reduce the time and expenses associated with
a plan administrator's determination of the qualified status of an order.
Examples of sample language that may be included in such forms are
provided in Appendix C.
Plan administrators are required to honor any domestic
relations order that satisfies the requirements to be a QDRO. In the view
of the department, therefore, a plan may not condition its determinations
of QDRO status on the use of any particular form.
A plan administrator is generally not required to
determine whether the issuing court or agency had jurisdiction to issue an
order, whether state law is correctly applied in the order, whether
service was properly made on the parties, or whether an individual
identified in an order as an alternate payee is in fact a spouse, former
spouse, child, or other dependent of the participant under state law.
Reference: Advisory Opinion 92-17A
In many cases, an order that is submitted to a plan may
clearly describe the identity and rights of the parties, but may be
incomplete only with respect to factual identifying information within the
plan administrator's knowledge or easily obtained through a simple
communication with the alternate payee or the participant. For example, an
order may misstate the plan's name or the names of participants or
alternate payees, and the plan administrator can clearly determine the
correct names, or an order may omit the addresses of participants or
alternate payees, and the plan administrator's records include this
information. In such a case, the plan administrator should supplement the
order with the appropriate identifying information, rather than rejecting
the order as not qualified.
Reference: ERISA §§ 206(d)(3)(C), 206(d)(3)(I); IRC
§ 414(p)(2); see S. Rep. 575, 98th Cong., 2d Sess. at 20
Plan administrators must determine whether a domestic
relations order is a QDRO within a reasonable period of time after
receiving the order. What is a reasonable period will depend on the
specific circumstances. For example, a domestic relations order that is
clear and complete when submitted should require less time to review than
an order that is incomplete or unclear.
Plans are required to adopt reasonable procedures for
determining the qualified status of domestic relations orders. Compliance
with such procedures should ensure that determinations of the qualified
status of an order take place within a reasonable period of time.
Procedures that unduly inhibit or hamper the QDRO determination process
will not be considered reasonable procedures.
Reference: ERISA § 206(d)(3)(G)(i)(II); IRC §
414(p)(6)(A)(ii)
During any period in which the issue of whether a
domestic relations order is a QDRO is being determined (by a plan
administrator, by a court of competent jurisdiction, or otherwise), ERISA
requires that the plan administrator separately account for the amounts
that would be payable to an alternate payee under the terms of the order
during such period if the order had been determined to be qualified. These
amounts are referred to as segregated amounts. During the period in which
the status of a domestic relations order is being determined, the plan
administrator must take steps to ensure that amounts that would have been
payable to the alternate payee, if the order were a QDRO, are not
distributed to the participant or any other person.
The plan administrator's duty to separately account for
and to preserve the segregated amounts is limited in time. ERISA provides
that the plan administrator must preserve the segregated amounts for not
longer than the end of an 18-month period. This 18-month period does not
begin until the first date (after the plan receives the order) that the
order would require payment to the alternate payee.
It is the view of the department that, in order to
ensure the availability of a full 18-month protection period, the 18
months cannot begin before the plan receives a domestic relations order.
Rather, the 18-month period will begin on the first date on which a
payment would be required to be made under an order following receipt by
the plan.
Reference: ERISA §§ 206(d)(3)(H), 404(a); IRC §
414(p)(7)
A plan administrator must determine whether a domestic
relations order is a QDRO within a reasonable period following receipt. In
the view of the department, the 18-month period during which a plan
administrator must preserve the segregated amounts is not the measure of
the reasonable period for determining the qualified status of an order and
in most cases would be an unreasonably long period of time to take to
review an order.
It is further the view of the department that, during
the determination period, the administrator, as a plan fiduciary, may not
permit distributions to the participant or any other person of any amounts
that would be payable to the alternate payee if the domestic relations
order were determined to be a QDRO. If the domestic relations order is
determined to be a QDRO before the first date on which benefits are
payable to the alternate payee, the plan administrator has a continuing
duty to account for and to protect the alternate payee's interest in the
plan to the same extent that the plan administrator is obliged to account
for and to protect the interests of the plan's participants. The plan
administrator also has a fiduciary duty to pay out benefits in accordance
with the terms of the QDRO.
The department understands that orders that are
initially rejected by the plan administrator as not qualified are
frequently revised and resubmitted within a short period of time. The
department also recognizes that in some instances plan administrators who
reject an order may receive requests from participants for immediate
distribution of benefits under circumstances that suggest that the
rejected order is being revised and will shortly be resubmitted to the
plan. In such circumstances, the plan administrator may be subject to
conflicting claims for either paying the benefit or failing to pay the
benefit. The department suggests that plan administrators may wish to
consider the establishment of a process for providing preliminary or
interim review of orders, and postponing final determinations for limited
periods, to permit parties to correct defects within the 18-month
segregation period. Such a process would reduce the likelihood of
conflicting claims.
Reference: ERISA §§ 206(d)(3)(H), 404(a)
Upon receipt of a domestic relations order, the
administrator must separately account for and preserve the amounts that
would be payable to an alternate payee until a determination is made with
respect to the status of the order. If, within the 18-month
period--beginning with the date (after receipt of the order by the plan)
on which the first payment would be required to be made to an alternate
payee under the order -- the plan administrator determines that the order
is a QDRO, the plan administrator must pay the segregated amounts to the
alternate payee in accordance with the terms of the QDRO. If, however, the
plan administrator determines within the 18-month period that the order is
not a QDRO, or if the status of the order is not resolved by the end of
the 18-month period, the plan administrator must pay out the segregated
amounts to the person or persons who would have been entitled to such
amounts if there had been no order. If the order is later determined to be
a QDRO, the order will apply only prospectively; that is, the alternate
payee will be entitled only to amounts payable under the order after the
subsequent determination.
Reference: ERISA §§ 206(d)(3)(H), 404(a); IRC §
414(p)(7)
The plan administrator is required to notify the
participant and each alternate payee of the administrator's determination
as to whether the order constitutes a QDRO. This notice should be in
writing and furnished promptly following a determination.
In the case of a determination that an order is not
qualified, the notice should include the reasons for the rejection. It is
the view of the department that, in most instances where there has been a
reasonable good faith effort to prepare a qualified domestic relations
order, the parties will attempt to correct any deficiencies in the order
and resubmit a corrected order for the plan administrator to review. The
department believes that, where a reasonable good faith effort has been
made to draft a QDRO, prudent plan administration requires the plan
administrator to furnish to the parties the information, advice, and
guidance that is reasonably required to understand the reasons for a
rejection, either as part of the notification process or otherwise, if
such information, advice, and guidance could serve to reduce multiple
submissions of deficient orders and therefore the burdens and costs to
plans attendant on review of such orders.
The notice of the plan administrator's determination
should be written in a manner that can be understood by the parties.
Multiple submissions and unnecessary expenses may be avoided by clearly
communicating in the rejection notice:
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The reasons why the order is not a QDRO
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References to the plan provisions on which the plan
administrator's determination is based
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An explanation of any time limits that apply to
rights available to the parties under the plan (such as the duration
of any protective actions the plan administrator will take)
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A description of any additional material,
information, or modifications necessary for the order to be a QDRO and
an explanation of why such material, information, or modifications are
necessary
Reference: ERISA §§ 206(d)(3)(G)(i)(II), 206(d)(3)(I);IRC
§ 414(p)(6)(A)(ii)
The plan administrator must act in accordance with the
provisions of the QDRO as if it were a part of the plan. In particular,
if, under a plan, a participant has the right to elect the form in which
benefits will be paid, and the QDRO gives the alternate payee that right,
the plan administrator must permit the alternate payee to exercise that
right under the circumstances and in accordance with the terms that would
apply to the participant, as if the alternate payee were the participant.
Reference: ERISA §§ 206(d)(3)(A), 206(d)(3)(E)(i)(III);
IRC §§ 401(a)(13)(B), 414(p)(4)(A)(iii)
ERISA provides that a person who is an alternate payee
under a QDRO generally shall be considered a beneficiary under the plan
for purposes of ERISA. Accordingly, the alternate payee must be furnished,
upon written request, copies of a variety of documents, including the
latest summary plan description, the latest annual report, any final
annual report, and the bargaining agreement, trust agreement, contract, or
other instrument under which the plan is established or operated. The
administrator may impose a reasonable charge to cover the cost of
furnishing such copies. It is the view of the department that, at such
time as benefit payments to the alternate payee commence under the QDRO,
the alternate payee must be treated as a beneficiary receiving benefits
under the plan and automatically furnished the summary plan description,
summaries of material plan changes, and the plan's summary annual report.
Reference: ERISA §§ 104, 105, 206(d)(3)(J), 404(a);
29 CFR § 2520.104b-1 et seq.
The rights of an alternate payee under a QDRO are
protected in the event of plan amendments, a plan merger, or a change in
the sponsor of the plan to the same extent that rights of participants or
beneficiaries are protected with respect to benefits accrued as of the
date of the event.
Reference: ERISA §§ 204(g), 206(d)(3)(A), 403(c)(1);
IRC §§ 401(a)(13)(B), 411(d)(6)
In the view of the department, the rights granted by a
QDRO must be taken into account in the termination of a plan as if the
terms of the QDRO were part of the plan. To the extent that the QDRO
grants the alternate payee part of the participant's benefits, the plan
administrator, in terminating the plan, must provide the alternate payee
with the notification, consent, payment, or other rights that it would
have provided to the participant with respect to that portion of the
participant's benefits.
Reference: ERISA §§ 206(d)(3)(A), 403(d)
The Pension Benefit Guaranty Corporation (PBGC) is a
Federal agency that insures pension benefits in most private-sector
defined benefit pension plans. It is important to note that not all plans
are insured by PBGC and not all plans that terminate become trusteed by
PBGC. For example, defined contribution plans (including 401(k) plans) are
generally not covered by PBGC's insurance. In addition, most defined
benefit plans that terminate have sufficient assets to pay all benefits.
PBGC does not trustee these plans.
When an insured plan terminates without enough money to
pay all guaranteed benefits, PBGC becomes trustee of the terminating plan
and pays the plan benefits subject to certain limits on amount and form.
For instance, PBGC does not pay certain death and supplemental benefits.
In addition, benefit amounts paid by PBGC are limited by ERISA, and the
forms of benefit PBGC pays are also limited.
PBGC has special rules that apply to payment of
benefits under QDROs. For example, if a QDRO is issued prior to plan
termination, PBGC will not modify the form of benefit payable to an
alternate payee specified in the QDRO. If, in contrast, a QDRO is issued
after plan termination, PBGC will generally limit the form of benefit that
PBGC will pay under the QDRO to the form permitted by PBGC in other
circumstances (generally a single life annuity). There are other special
rules that apply to the administration by PBGC of QDROs. These rules are
explained in PBGC's booklet, Divorce Orders & PBGC.
For information about a specific domestic relations
order or QDRO affecting a plan trusteed by PBGC, write to:
PBGC QDRO Coordinator
P.O. Box 15170
Alexandria, VA 22315-1750
For information
about terminated pension plans that PBGC has trusteed, benefit information
with respect to a participant in a PBGC-trusteed plan, or to request a
copy of PBGC's booklet, call the Customer Service Center at
1.800.400.PBGC. The booklet is also available on the PBGC
Web site.
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