Determining Qualified Status And Paying Benefits What information is an administrator required to
provide a prospective alternate payee before the administrator receives a
domestic relations order? 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) What are the duties of a plan administrator upon
receipt of a domestic relations order by the plan? 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) Is a plan required to have procedures for determining
whether a domestic relations order is qualified? Reference: ERISA § 206(d)(3)(G)(ii); IRC § 414(p)(6)(B) What requirements must a plan's QDRO procedures meet?
Reference: ERISA § 206(d)(3)(G)(ii); IRC § 414(p)(6) Are there other matters that should be addressed in a
plan's QDRO procedures?
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) May a plan administrator charge a participant or
alternate payee for determining the qualified status of a domestic
relations order? Reference: ERISA § 404(a): see Field Assistance Bulletin 2003-3 May plan administrators provide parties with a model
form or forms to assist in the preparation of a QDRO? 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. In determining the qualified status of a domestic
relations order, is the administrator required to determine the validity
of the order under state domestic relations law? Reference: Advisory Opinion 92-17A Is a plan administrator required to reject a domestic
relations order as defective if the order fails to specify factual
identifying information that is easily obtainable by the plan
administrator? Reference: ERISA §§ 206(d)(3)(C), 206(d)(3)(I); IRC § 414(p)(2); see S. Rep. 575, 98th Cong., 2d Sess. at 20 How long may the plan administrator take to determine
whether a domestic relations order is a QDRO? 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) What must the plan administrator do during the
determination process to protect against wrongly paying pension benefits
to the participant that would be paid to the alternate payee if the
domestic relations order had been determined to be a QDRO? 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) What are an administrator's duties with respect to a
domestic relations order received by the plan before the beginning of the
18-month period? 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) What are an administrator's duties with respect to a
domestic relations order received on or after the date on which benefits
would be payable to an alternate payee under the order? Reference: ERISA §§ 206(d)(3)(H), 404(a); IRC § 414(p)(7) What kind of notice is required to be provided by a
plan administrator following a QDRO 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:
Reference: ERISA §§ 206(d)(3)(G)(i)(II), 206(d)(3)(I);IRC § 414(p)(6)(A)(ii) What effect does an order that a plan administrator has
determined to be a QDRO have on the administration of the plan? Reference: ERISA §§ 206(d)(3)(A), 206(d)(3)(E)(i)(III); IRC §§ 401(a)(13)(B), 414(p)(4)(A)(iii) What disclosure rights does an alternate payee have
under a QDRO? Reference: ERISA §§ 104, 105, 206(d)(3)(J), 404(a); 29 CFR § 2520.104b-1 et seq. What happens to the rights created by a QDRO if the
plan to which the QDRO applies is amended, merged into another plan, or is
maintained by a successor employer? Reference: ERISA §§ 204(g), 206(d)(3)(A), 403(c)(1); IRC §§ 401(a)(13)(B), 411(d)(6) What happens to the rights created by a QDRO if a plan
is terminated? Reference: ERISA §§ 206(d)(3)(A), 403(d) What happens to the rights created by a QDRO if a
defined benefit plan is terminated and the Pension Benefit Guaranty
Corporation becomes trustee of the Plan? 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:
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. |
|