Qualified Domestic Relations Orders

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More than 84 million Americans are currently covered by employer-sponsored retirement plans. For many of these Americans, retirement savings represent one of their most significant assets. For this reason it should be no surprise that dividing a participant’s retirement plan account is often an important issue in separation, divorce and other domestic relations proceedings.

While the division of marital property is generally governed by state law, any assignments of pension benefits must also comply with federal law. And federal law does not permit a participant to assign or alienate their interest in a retirement plan to another person. This "anti-assignment and alienation" rule is intended to ensure that a participant’s benefits are actually available to provide financial support during their retirement years.

A limited exception to the anti-assignment and alienation rule is provided for assignments of pension benefits through qualified domestic relations orders (QDROs). A QDRO is a document that gives someone else (a spouse, former spouse, child or other dependent) the right to all or part of a participant’s retirement plan benefits. As a plan sponsor, you cannot pay a participant’s benefit to anyone other than the participant without this document. (This does not apply to death benefits.)

A QDRO is issued by a state authority, generally a court, and must contain all of 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, and
• The number of payments or time period to which the order applies.
  

• 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;
  
• 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.