KRS § 61.690 — KY Code / Title VIII / Chapter 61 / Section 61.690
61.690 Exemption of retirement allowances -- Taxability after December 31, 1997 -- Domestic relations orders
Status: in_force

61.690 Exemption of retirement allowances -- Taxability after December 31,

1997 -- Domestic relations orders.

(1) Except as otherwise provided by this section and KRS 61.705(4), all retirement

allowances and other benefits accrued or accruing to any person under the

provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852,

and the accumulated account balance and cash securities in the funds created

under KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852, are

hereby exempt from any state, county, or municipal tax, and shall not be

subject to execution, attachment, garnishment, or any other process, and shall

not be assigned.

(2) Notwithstanding the provisions of subsection (1) of this section, retirement

benefits accrued or accruing to any person under the provisions of KRS 61.510

to 61.705, 16.505 to 16.652, and 78.510 to 78.852 on or after January 1, 1998,

shall be subject to the tax imposed by KRS 141.020, to the extent provided in

KRS 141.010 and 141.0215.

(3) Qualified domestic relations orders issued by a court or administrative agency

shall be honored by the retirement system if:

(a) The benefits payable pursuant to the order meet the requirements of a

qualified domestic relations order as provided by 26 U.S.C. sec. 414(p).

The retirement system shall follow applicable provisions of 26 U.S.C. sec.

414(p) in administering qualified domestic relations orders;

(b) The order meets the requirements established by the retirement system

and by subsections (3) to (11) of this section. The board of trustees of the

retirement system shall establish the requirements, procedures, and

forms necessary for the administration of qualified domestic relations

orders by promulgation of administrative regulations in accordance with

KRS Chapter 13A; and

(c) The order is on the form established by the retirement system pursuant to

the retirement system's authority provided under paragraph (3)(b) of this

subsection.

(4) A qualified domestic relations order shall not:

(a) Require the retirement system to take any action not authorized under

state or federal law;

(b) Require the retirement system to provide any benefit, allowance, or other

payment not authorized under state or federal law;

(c) Grant or be construed to grant the alternate payee any separate right,

title, or interest in or to any retirement benefit other than to receive

payments from the participant's account in accordance with the

administrative regulations promulgated by the retirement system and as

provided by subsections (3) to (11) of this section; or

(d) Grant any separate interest to any person other than the participant.

(5) Any qualified domestic relations order submitted to the retirement system shall

specify the dollar amount or percentage amount of the participant's benefit to

be paid to the alternate payee. In calculating the amount to be paid to the

alternate payee, the court or administrative agency that is responsible for

issuing the order shall follow the requirements set forth in the administrative

regulations promulgated by the board of trustees. Notwithstanding any other

statute to the contrary, the board shall not be required to honor a qualified

domestic relations order that does not follow the requirements set forth in the

administrative regulations promulgated by the board of trustees.

(6) If the qualified domestic relations order meets the requirements established by

the system and by subsections (3) to (11) of this section, payments to the

alternate payee shall begin under the following conditions:

(a) If the participant is retired and is receiving a monthly retirement

allowance, the month following the date the retirement system receives a

qualified domestic relations order that complies with the administrative

regulations promulgated by the retirement system and subsections (3) to

(11) of this section; or

(b) If the participant is not retired, the month of the participant's effective

retirement date in which the first retirement allowance is payable to the

participant or the month in which the participant receives a refund of his or

her accumulated account balance as provided by KRS 61.625.

(7) An alternate payee's benefits and rights under a qualified domestic relations

order shall terminate upon the earlier of:

(a) The death of the participant;

(b) The death of the alternate payee; or

(c) The termination of the participant's benefits under any of the provisions of

KRS 16.505 to 16.652, 61.510 to 61.705, and 78.510 to 78.852.

(8) An alternate payee shall not receive a monthly payment under a qualified

domestic relations order if the participant is not receiving a monthly retirement

allowance.

(9) The cost of living adjustment provided to the participant pursuant to KRS

61.691 or 78.5518 shall be divided between the participant and alternate payee

in a qualified domestic relations order as follows:

(a) If the order specifies the alternate payee is to receive a percentage of the

participant's benefit, then the cost of living adjustment shall be divided

between the participant and the alternate payee based upon the

percentage of the total benefit each is receiving upon the participant's

retirement or upon the date the order is approved by the retirement

system, whichever is later; or

(b) If the order specifies that the alternate payee is to receive a set dollar

amount of the participant's benefit, then the order shall specify that:

1. The cost of living adjustment shall be divided between the

participant and the alternate payee based upon the percentage of

the total benefit each is receiving upon the participant's retirement or

upon the date the order is approved by the retirement system,

whichever is later; or

2. The alternate payee shall receive no cost of living adjustment.

If the order does not specify the division of the cost of living adjustment

as required by this paragraph, then no cost of living adjustment shall be

payable to the alternate payee. If no cost of living adjustment is provided

to the alternate payee, then the participant shall receive the full cost of

living adjustment he or she would have received if the order had not been

applied to the participant's account.

(10) Except in cases involving child support payments, the retirement system may

charge reasonable and necessary fees and expenses to the recipient and the

alternate payee of a qualified domestic relations order for the administration of

the qualified domestic relations order by the retirement system. All fees and

expenses shall be established by administrative regulations promulgated by

the board of trustees of the retirement system. The qualified domestic relations

order shall specify whether the fees and expenses provided by this subsection

shall be paid:

(a) Solely by the participant;

(b) Solely by the alternate payee; or

(c) Equally shared by the participant and alternate payee.

(11) The retirement system shall honor a qualified domestic relations order issued

prior to July 15, 2010, if:

(a) The order was on file and approved by the retirement system prior to July

15, 2010. All benefits, including cost of living adjustments payable to the

alternate payee, for orders that meet the requirements of this paragraph

shall not be eliminated or reduced as a result of the provisions of

subsections (3) to (10) of this section and KRS 61.510(27) and

78.510(26); or

(b) The order or an amended version of the order meets the requirements

established by this section and the administrative regulations promulgated

by the retirement system. The order shall not apply to benefit payments

issued by the retirement system prior to the date the order was approved

by the retirement system.