Divorce Orders PBGC &
This booklet provides general information to attorneys and other pension professionals on

qualified domestic relations orders (QDROs) submitted to the Pension Benefit Guaranty

Corporation (PBGC) after a pension plan terminates and PBGC becomes trustee. The

information summarizes PBGC’s rules at the time that the booklet was printed. It is not

intended to give legal advice or to replace the advice of an attorney. None of this information

takes precedence over legislation, regulations, or specific interpretations or rulings.

The information does not represent the government’s interpretation of the rules

governing QDROs. Interpretation of those rules is within the jurisdiction of the 

U.S. Department of Labor and the Internal Revenue Service. 
1

Page

I PBGC and Qualified Domestic Relations Orders 2

II PBGC Model QDROs 4

III Procedures and Checklist 22

IV Glossary 25

Appendix A Defined Benefit Pension Plans and PBGC Benefit Rules 28

Appendix B QDROs Issued Before PBGC Becomes Trustee 30

Appendix C QDRO Tax Rules 31

Contents
2

The Pension Benefit Guaranty

Corporation (PBGC) is a federal agency that

insures the benefits of nearly 42 million

working men and women in about 55,000

private-sector defined benefit pension plans.

A defined benefit pension plan that does

not have enough money to pay benefits may

be terminated if the employer responsible

for the plan faces severe financial difficulty,

such as bankruptcy, and is unable to

maintain the plan. In such an event, PBGC

becomes trustee of the plan and pays

pension benefits, subject to legal limits, to

plan participants and beneficiaries. PBGC’s

rules on benefit amounts and benefit forms

payable by PBGC are summarized in

Appendix A and can be found in 29 C.F.R.

4000 et. seq. and the agency’s operating

policy manual.

The benefits of a pension plan

participant generally may not be assigned or

alienated. The law provides an exception for

domestic relations orders that relate to child

support, alimony payments, or marital

property rights of an alternate payee (a

spouse, former spouse, child, or other

dependent of a plan participant). The

exception applies only if the domestic

relations order meets specific legal

requirements that make it qualified, i.e., a

QDRO. See section 206(d) of the Employee

Retirement Income Security Act, as

amended, and section 414(p) of the Internal

Revenue Code of 1986.

PBGC reviews a submitted domestic

relations order to determine whether the

I PBGC and Qualified Domestic Relations Orders

order is qualified before paying benefits to

an alternate payee.

PBGC QDRO Requirements

Identity of the plan participant, each

alternate payee, and each pension plan. A

QDRO must specify the name and last

known mailing address of the plan

participant and each alternate payee covered

by the order. A QDRO also must identify

the name of each plan to which the order

applies — if possible, this should be the

plan’s formal name.

Amount to be paid, when payments

start, and payment form. A QDRO must

specify or allow the alternate payee to

choose when payments to the alternate

payee start and the form of payments. A

QDRO also must state how much of the

plan participant’s benefit is to be paid to the

alternate payee, such as a dollar amount or

percentage of the benefit, or make clear the

manner in which the dollar amount or

percentage is to be determined.

When benefits stop, and what happens

on the death of the plan participant or the

alternate payee. A QDRO should specify

when benefits to the alternate payee stop. It

also should specify whether benefits will be

paid to an alternate payee on the death of

the participant and, if so, the amount of the

benefits. In particular, a QDRO should

specify whether the alternate payee will be

treated as the participant’s spouse for

purposes of any survivor benefits. A
3

QDRO also should specify what happens

when the alternate payee dies. 

What A QDRO Must Not Include

A QDRO must not require PBGC to:

• provide any type or form of benefit, or

any option, not otherwise provided by

PBGC or allowed by ERISA and the

Code;

• pay benefits with a value in excess of the

value of benefits that would otherwise be

payable by PBGC or allowed by ERISA

and the Code; or

• pay benefits to an alternate payee when

those benefits are required to be paid to

another alternate payee under an order

previously determined to be a QDRO.
4

PBGC has developed two model

QDROs for use after a defined benefit plan

has terminated and PBGC has become

trustee of the plan: a PBGC Model

Separate Interest QDRO and a PBGC

Model Shared Payment QDRO. A QDRO

should be clear as to whether the alternate

payee is to receive a portion of the overall

value of the participant’s pension or just a

portion of each of the participant’s pension

payments. PBGC’s Model QDROs make

this distinction clear.

The PBGC Model Separate Interest

QDRO is intended to be used when an

alternate payee wishes to receive pension

benefits without regard to when the

participant starts payments and without

regard to the form of the participant’s

payments. The participant’s accrued

benefit is divided into two separate parts —

one for the participant and one for the

alternate payee. The PBGC Model Separate

Interest QDRO gives the alternate payee

control over the timing and form of his or

II PBGC Model QDROs

her benefit payments. The alternate payee

can receive pension benefits over his or her

lifetime rather than the participant’s

lifetime, and can start his or her payments

before the participant starts payments. The

PBGC Model Separate Interest QDRO may

only be used if the participant has not yet

started to receive payments.

With the PBGC Model Shared Payment

QDRO, the plan participant and the

alternate payee “share” each benefit

payment. The model may be used

regardless of whether the participant has

started payments, but the alternate payee

cannot start receiving benefits before the

participant starts receiving benefits. Under

the PBGC Model Shared Payment QDRO,

the timing and duration of payments to the

alternate payee will be tied to the

participant’s payments. Payments to the

alternate payee stop when the participant

dies unless the QDRO provides that the

alternate payee is to receive survivor

benefits.
5

QUALIFIED DOMESTIC RELATIONS ORDER

This Order is intended to be a qualified domestic relations

order (“QDRO”), as that term is defined in section 206(d) of

the Employee Retirement Income Security Act of 1974 (“ERISA”)

and section 414(p) of the Internal Revenue Code of 1986

(“Code”). This QDRO is granted in accordance with [applicable

state domestic relations law citations], which relate to marital

property rights, child support, and/or spousal support between

spouses and former spouses in matrimonial actions.

SECTION 1. IDENTIFICATION OF PLAN

This Order applies to benefits under the [formal name of plan]

(“Plan”). The Pension Benefit Guaranty Corporation (“PBGC”) is

trustee of the Plan.

SECTION 2. IDENTIFICATION OF PARTICIPANT AND ALTERNATE PAYEES

a. [Name of the Participant] is hereafter referred to as the

“Participant.” The Participant’s address is [specify address].

The Participant’s Social Security Number is [specify Social

Security Number]. The Participant is not receiving benefits from

PBGC with respect to this Plan. 

PBGC Model Separate Interest QDRO

PBGC Model Separate Interest QDRO

IN RE MARRIAGE/SUPPORT OF

__________________

PETITIONER,

V.

__________________

PARTICIPANT,

RESPONDENT.

X

:

:

:

:

:

:

:

:

X

CASE NO. ____________

IN THE ___________ COURT OF ______________ 

DIVISION ______________ COUNTY ______________

(This model QDRO is for use when a defined benefit pension plan has terminated, PBGC has

become trustee of the plan, and the parties want PBGC to divide the value of the participant’s

accrued benefit between the participant and the alternate payee. This model may only be used if

payment of the participant’s benefits has not started.) 
6

b. [Name of the Alternate Payee] is hereafter referred to as

the “Alternate Payee.” The Alternate Payee’s address is [specify

address]. The Alternate Payee’s Social Security Number is

[specify Social Security Number]. The Alternate Payee is the

[spouse/former spouse/child/other dependent] of the Participant.

c. [Name of the Contingent Alternate Payee] is hereafter

referred to as the “Contingent Alternate Payee.” The Contingent

Alternate Payee’s address is [specify address]. The Contingent

Alternate Payee’s Social Security Number is [specify Social

Security Number]. The Contingent Alternate Payee is the

[spouse/former spouse/child/other dependent] of the Participant.

SECTION 3. AMOUNT OF BENEFIT TO BE PAID TO ALTERNATE PAYEE

Starting at the time specified in section 5, PBGC shall pay

to the Alternate Payee as a separate interest an amount

actuarially equivalent to the value of [$x per month/x%] of the

Participant’s accrued benefit. The Participant’s accrued benefit

shall be determined as of [date of divorce/date of plan

termination/some other date]. 

SECTION 4. PBGC BENEFIT LIMITATIONS

If PBGC adjusts the Participant’s benefit after PBGC approves

this Order, any reduction shall be applied by decreasing [pro

rata the Participant’s and the Alternate Payee’s benefits/the

value of the Participant’s remaining accrued benefit first/the

value of the Alternate Payee’s separate interest first/specify

another way], and any increase shall be applied by increasing

[pro rata the Participant’s and the Alternate Payee’s

benefits/the value of the Participant’s remaining accrued

benefit first/the value of the Alternate Payee’s separate

interest first/specify another way].

SECTION 5. BENEFITS START

PBGC shall start payments to the Alternate Payee on [such

future date as the Alternate Payee elects/a future specified

date/submission of the Order] under PBGC payment procedures. 

SECTION 6. FORM OF BENEFIT

PBGC shall pay the Alternate Payee’s benefit in the form of a

[single life annuity over the Alternate Payee’s life/temporary

life annuity for child support or alimony]. 

PBGC Model Separate Interest QDRO
7

SECTION 7. BENEFITS STOP

PBGC shall stop payments from the Alternate Payee’s separate

interest in accordance with the form of payment specified in

section 6. 

SECTION 8. DEATH OF PARTICIPANT

Payments under the Alternate Payee’s separate interest shall

not be affected by the Participant’s death. 

SECTION 9. DEATH OF ALTERNATE PAYEE 

If the Alternate Payee dies before commencing benefits and

section 2 of this Order does not provide for a Contingent

Alternate Payee on the Alternate Payee’s death, the Alternate

Payee’s separate interest shall [revert to the Participant/be

forfeited to PBGC]. If section 2 of this Order provides for a

Contingent Alternate Payee, and if the Alternate Payee dies

before commencing benefits, the Contingent Alternate Payee shall

be paid an amount actuarially equivalent to the value of [$x

per month/x%] of the Participant’s accrued benefit. The

Contingent Alternate Payee’s separate interest shall be paid

[specify start, form, and stop].

SECTION 10. SPOUSAL RIGHTS OF FORMER SPOUSE AS ALTERNATE PAYEE

a. PBGC [shall/shall not] treat the Alternate Payee as the

Participant’s spouse for purposes of the Participant’s joint and

survivor annuity resulting from the accrued benefit in which the

Participant retains a separate interest. The Alternate Payee’s

right to the spousal survivor annuity shall apply only to [$x

per month/x%] of the accrued benefit in which the Participant

retains a separate interest.

b. PBGC [shall/shall not] treat the Alternate Payee as the

Participant’s spouse for purposes of the Participant’s

preretirement survivor annuity resulting from the accrued

benefit in which the Participant retains a separate interest.

The Alternate Payee’s right to the spousal preretirement

survivor annuity shall apply only to [$x per month/x%] of the

accrued benefit in which the Participant retains a separate

interest.

PBGC Model Separate Interest QDRO
8

SECTION 11. COMPLIANCE WITH APPLICABLE LAWS

The parties to this Order intend that it comply with

applicable provisions of ERISA and the Code. Nothing in this

Order shall require PBGC:

a. To pay any benefits not permitted under the Code or ERISA;

b. To provide any type or form of benefit or any option not

provided by PBGC with respect to the Plan;

c. To pay total benefits with a value in excess of the value

of the benefits the Participant otherwise would receive

under Title IV of ERISA; or

d. To pay benefits to the Alternate Payee that are required to

be paid to another alternate payee under another QDRO that

is in effect prior to this Order.

SECTION 12. RESERVATION OF JURISDICTION

The Court reserves jurisdiction to amend this Order to

establish or maintain its status as a QDRO under ERISA and the

Code.

IT IS SO ORDERED:

Date:___________ ___________________________

JUDGE

PBGC Model Separate Interest QDRO
9

QUALIFIED DOMESTIC RELATIONS ORDER

This Order is intended to be a qualified domestic relations

order (“QDRO”), as that term is defined in section 206(d) of

the Employee Retirement Income Security Act of 1974 (“ERISA”)

and section 414(p) of the Internal Revenue Code of 1986

(“Code”). This QDRO is granted in accordance with [applicable

state domestic relations law citations], which relate to marital

property rights, child support, and/or spousal support between

spouses and former spouses in matrimonial actions.

SECTION 1. IDENTIFICATION OF PLAN

This Order applies to benefits under the [formal name of plan]

(“Plan”). The Pension Benefit Guaranty Corporation (“PBGC”) is

trustee of the Plan.

SECTION 2. IDENTIFICATION OF PARTICIPANT AND ALTERNATE PAYEES

a. [Name of the Participant] is hereafter referred to as the

“Participant.” The Participant’s address is [specify address].

The Participant’s Social Security Number is [specify Social

Security Number]. The Participant [is/is not] receiving benefits

from PBGC with respect to this Plan. 

b. [Name of the Alternate Payee] is hereafter referred to as

the “Alternate Payee.” The Alternate Payee’s address is [specify

PBGC Model Shared Payment QDRO

PBGC Model Shared Payment QDRO

(This model QDRO is for use when a defined benefit pension plan has terminated, PBGC has become trustee of

the plan, and PBGC is to pay the alternate payee a portion of the participant’s monthly benefit payments. This

model may be used before or after the participant begins receiving benefit payments.)

CASE NO. ____________

IN THE ___________ COURT OF ______________ 

DIVISION ______________ COUNTY ______________

IN RE MARRIAGE/SUPPORT OF

__________________

PETITIONER,

V.

__________________

PARTICIPANT,

RESPONDENT.

X

:

:

:

:

:

:

:

:

X
10

address]. The Alternate Payee’s Social Security Number is

[specify Social Security Number]. The Alternate Payee is the

[spouse/former spouse/child/other dependent] of the Participant.

c. [Name of the Contingent Alternate Payee] is hereafter

referred to as the “Contingent Alternate Payee.” The Contingent

Alternate Payee’s address is [specify address]. The Contingent

Alternate Payee’s Social Security Number is [specify Social

Security Number]. The Contingent Alternate Payee is the

[spouse/former spouse/child/other dependent] of the Participant.

SECTION 3. AMOUNT OF BENEFIT TO BE PAID TO ALTERNATE PAYEE

Starting at the time specified in section 5, PBGC shall pay

to the Alternate Payee [$x/x%] of each of the Participant’s

monthly benefit payments. When [insert future event] occurs and

PBGC is notified, PBGC shall [increase/decrease] the amount paid

to the Alternate Payee from each of the Participant’s monthly

benefit payments to [$x/x%].

SECTION 4. PBGC BENEFIT LIMITATIONS

If PBGC adjusts the Participant’s benefit after PBGC approves

this Order, any reduction shall be applied by decreasing [pro

rata the Participant’s and the Alternate Payee’s benefits/the

Participant’s benefit first/the Alternate Payee’s benefit

first/specify another way], and any increase shall be applied by

increasing [pro rata the Participant’s and the Alternate Payee’s

benefits/the Participant’s benefit first/the Alternate Payee’s

benefit first/specify another way]. 

SECTION 5. BENEFITS START

PBGC shall start payments to the Alternate Payee [on such

future date as the Alternate Payee elects/on a future specified

date/on submission of the Order/when PBGC starts payments to the

Participant] under PBGC payment procedures. Payments shall not

start earlier than the date the Participant starts payments.

SECTION 6. FORM OF BENEFIT

PBGC shall pay the Alternate Payee’s benefit at the same time

as the Participant’s benefit is paid to the Participant.

PBGC Model Shared Payment QDRO
11

SECTION 7. BENEFITS STOP

Except for any survivor benefits described in section 10, PBGC

shall make payments to the Alternate Payee until the

[Participant’s death/earlier of the Participant’s death or the

occurrence of a specific date or event].

SECTION 8. DEATH OF PARTICIPANT

Except for any survivor benefits described in section 10, if

the Participant dies before the Alternate Payee, PBGC shall stop

payments, if any, to the Alternate Payee as of the first

payment that would have followed the Participant’s death.

SECTION 9. DEATH OF ALTERNATE PAYEE

If the Alternate Payee dies before the Participant and 

section 2 of this Order does not provide for a Contingent

Alternate Payee on the Alternate Payee’s death, PBGC shall

return the Participant’s monthly benefit payments to the level

that the Participant would be receiving had there been no QDRO.

If section 2 of this Order provides for a Contingent Alternate

Payee on the Alternate Payee’s death, the Contingent Alternate

Payee shall be paid [$x/x%] of each of the Participant’s monthly

benefit payments. The Contingent Alternate Payee’s benefits

shall be paid [specify start and stop].

SECTION 10. SPOUSAL RIGHTS OF FORMER SPOUSE AS ALTERNATE PAYEE

a. PBGC [shall/shall not] treat the Alternate Payee as the

Participant’s spouse for purposes of the Participant’s joint and

survivor annuity resulting from the Participant’s accrued

benefit. The Alternate Payee’s right to the spousal survivor

annuity shall apply only to [$x per month/x%] of the

Participant’s accrued benefit.

b. PBGC [shall/shall not] treat the Alternate Payee as the

Participant’s spouse for purposes of the Participant’s

preretirement survivor annuity resulting from the Participant’s

accrued benefit. The Alternate Payee’s right to the spousal

preretirement survivor annuity shall apply only to [$x per

month/x%] of the Participant’s accrued benefit.

PBGC Model Shared Payment QDRO
12

SECTION 11. COMPLIANCE WITH APPLICABLE LAWS

The parties to this Order intend that it comply with

applicable provisions of ERISA and the Code. Nothing in this

Order shall require PBGC:

a. To pay any benefits not permitted under the Code or ERISA;

b. To provide any type or form of benefit or any option not

provided by PBGC with respect to the Plan;

c. To pay total benefits with a value in excess of the value

of the benefits the Participant otherwise would receive

under Title IV of ERISA; or

d. To pay benefits to the Alternate Payee that are required to

be paid to another alternate payee under another QDRO that

is in effect prior to this Order.

SECTION 12. RESERVATION OF JURISDICTION

The Court reserves jurisdiction to amend this Order to

establish or maintain its status as a QDRO under ERISA and the

Code.

IT IS SO ORDERED:

Date:___________ ___________________________

JUDGE

PBGC Model Shared Payment QDRO
13

PBGC Model QDRO Instructions

The following information on

completing the PBGC model QDROs

discusses each provision separately but all of

the provisions work together. The time

that benefit payments start and stop can

affect the amount of benefits the participant

and the alternate payee will receive.

Similarly, the form of benefit payments —

whether benefits are paid as a single life

annuity or an annuity with survivor

benefits — can affect the amount of benefits

the parties will receive.

The models are drafted assuming one

plan and one alternate payee (and one

contingent alternate payee, if desired). If

the QDRO is intended to cover more than

one PBGC-trusteed plan or more than one

alternate payee, the QDRO should be clear

as to which plan and alternate payee each

provision is addressing. One way of doing

this is to repeat sections 1 through 10 as

necessary. 

Introductory Paragraph

Insert the applicable state domestic

relations law citations.

Section 1. Identification of Plan 

Insert the formal name of the plan covered

by this Order (i.e., the full name as stated in

plan documents). 

Section 2. Identification of

Participant and Alternate 

Payees 

(a) Insert the name, address and Social

Security Number of the participant. Also,

in the PBGC Model Shared Payment

QDRO, indicate whether the participant is

or is not currently receiving benefit

payments from PBGC with respect to the

plan specified in section 1.

(b) Insert the name, address and Social

Security Number of the alternate payee.

Specify the relationship (spouse/former

spouse/child/other dependent) of the

alternate payee to the participant. 

(c) Add the same information for any

contingent alternate payee.

The QDRO should be clear on the

identity of the participant, the alternate

payee, and any contingent alternate payee.

For example, the QDRO could name the

participant’s spouse as the alternate payee

and the participant’s child as a contingent

alternate payee. In the event an alternate

payee or contingent alternate payee is a

minor or legally incompetent, the QDRO

must include the name and address of the

legal representative who will receive

payments on behalf of that person.

Section 3. Amount of Benefit to Be 

Paid to the Alternate 

Payee

Insert the flat dollar amount, percentage of

the value of the participant’s accrued benefit,

or percentage of the participant’s benefit

payment that the alternate payee is to receive.

Also insert the date as of which the benefit is

to be calculated.

The parties must decide how much of

the plan participant’s benefit the alternate

payee will receive. Because the participant
14

in a defined benefit plan often does not

know the specific amount that will be paid

at retirement, this can be difficult for the

parties to address and for PBGC to

interpret. The assistance of an actuary may

be helpful in making these complex

determinations.

PBGC has found there is less confusion

with a QDRO that states a specific

percentage or amount, and the models are

drafted with that approach. If, instead, the

parties choose to include a formula, PBGC

will treat the domestic relations order as

qualified only if the benefit under the

formula can be determined based on the

information in the QDRO. The QDRO

must include any information that would

be necessary to determine the benefit

amount (for example, a child’s birthdate if

the benefit stops when the child attains a

certain age).

The PBGC Model Separate Interest

QDRO provides that the alternate payee

will receive a benefit “actuarially

equivalent” to the value of a specified

portion of the participant’s accrued benefit.

PBGC will then determine the amount of

the alternate payee’s monthly benefit using

the actuarial factors in the participant’s

pension plan or, if the plan does not have

applicable factors, PBGC factors. (The

QDRO cannot provide for PBGC to use

other factors.)

The PBGC Model Shared Payment

QDRO provides that the alternate payee

will receive a portion of each of the

participant’s benefit payments on or after

the participant commences benefit

payments. It allows the alternate payee’s

portion to increase or decrease at a specified

time or upon a specified event. The

QDRO must specify the amount and

timing of any change. The Shared Payment

QDRO cannot provide for payments to the

alternate payee prior to submission of the

domestic relations order. However, much

the same result can be achieved by giving

the alternate payee increased initial

payments.

There are many ways to determine the

portion of an accrued benefit or pension

payment that the alternate payee is to

receive under a QDRO. The QDRO can

specify a dollar amount or a percentage or

provide a formula for determining the

amount or percentage. The dollar amount

or percentage can be based on the

participant’s entire benefit or payment, or

just on the part of the benefit or payment

earned during the marriage or up to the

date of division.

The PBGC Model Separate Interest

QDRO provides that the alternate payee is

to receive a specific amount or a percentage

of the value of the participant’s accrued

benefit (for example, 50% of the value of

the accrued benefit). In a Separate Interest

QDRO, the sum of the values of the

participant’s portion and the alternate

payee’s portion cannot exceed the total

value of the participant’s accrued benefit

before the alternate payee’s separate interest

was created. 
15

The Separate Interest QDRO must

specify the date as of which the

participant’s benefit and the alternate

payee’s portion of that benefit are to be

determined. Typically, for QDROs issued

after PBGC trustees a plan, the portions of

benefits are determined based on the

participant’s accrued benefit as of the date

of divorce, separation, or plan termination.

(In plans trusteed by PBGC, all benefit

accruals will have ceased no later than the

date the plan terminated.) 

Example 1 - Separate Interest QDRO.

Carol is age 30 and Mark is age 40. Their

QDRO provides that Mark will receive a

50% interest in the pension benefit Carol

had accrued at the time of their divorce.

Carol’s accrued benefit at the time of the

divorce is $600 per month in the form of a

life annuity with payments beginning at

her age 65. Mark’s 50% interest in Carol’s

accrued benefit has a value that is

actuarially equivalent to a life annuity of

$300 ($600 x 50%) per month to Carol

beginning at her age 65. 

Mark is older than Carol, so a benefit of

$300 per month to Carol at age 65

generally will provide a different monthly

benefit for Mark regardless of when he

starts benefits. Mark’s actual monthly life

annuity payments will depend on his age

when he starts benefit payments and the

plan’s actuarial factors.

The PBGC Model Shared Payment

QDRO provides that a specific amount or a

percentage of each of the participant’s

monthly benefit payments is paid directly

to the alternate payee (for example, 25% of

each monthly benefit payment). The

combined benefit payments to the

participant and the alternate payee under a

Shared Payment QDRO cannot exceed the

benefit that would be paid to the

participant if the QDRO were not in effect.

Example 2 – Shared Payment QDRO.

Dick agrees to provide his former spouse,

Jane, with 25% of each of his monthly

pension payments once his payments start.

Dick’s payments will be $900 per month

beginning at age 65. Jane’s portion of

Dick’s payment will be $225 per month,

calculated as follows: $900 x 25% = $225.

Under the QDRO, Jane will receive $225

per month for Dick’s lifetime and Dick

will receive $675 per month ($900 - $225). 

In calculating the amount or percentage

to be given to the alternate payee under a

QDRO, the parties frequently will look at

what portion of the participant’s benefit or

payments was earned during the time the

alternate payee and the participant were

married. Under this method, the alternate

payee’s portion of the participant’s benefit

or payments (for example, 50%) would be

multiplied by a fraction, the numerator of

which is the number of years during the

parties’ marriage that the participant earned

benefits under the plan, and the

denominator of which is the total number

of years the participant earned benefits

under the plan. This method of allocating

the benefit is sometimes referred to as the

fractional or time method.
16

Example 3 - Fractional Method

(Separate Interest QDRO). Continuing

with Example 1, assume Carol had earned

benefits under the plan for 10 years as of

the date of the divorce and was married to

Mark for 5 of those years. If their QDRO

modified Mark’s 50% separate interest by

the fractional method, Mark’s 50% would

be further reduced for the marriage

fraction of 5/10. Thus, Mark’s pension

would be actuarially equivalent to the

value of a single life annuity of $150 ($600

x 50% x 5/10) per month payable to Carol

beginning at her age 65. (If Mark and

Carol had been married 12 years, and

Carol had earned benefits for 10 of those

years, the marriage fraction would have

been 10/10.)

Section 4. PBGC Benefit Limitations 

Insert the method for allocating any

adjustments PBGC makes in benefits. Because

the parties may wish to handle benefit

increases and decreases differently, the models

include separate sentences for each. 

After trusteeing a plan, PBGC may

reduce benefits as necessary to meet the

limitations established by ERISA (see

Appendix A). PBGC pays estimated

benefits until it has completed its work on

the plan and determined final benefits. In

some cases — especially in plans with

incomplete records or complex benefit

structures — final benefit amounts will

differ from the estimated payments.

If the estimated payments are too low,

PBGC will pay the difference (plus interest)

in a lump sum. If the estimated payments

are too high, PBGC will actuarially reduce

the final monthly benefit payments

(generally by no more than 10%) to recover

any overpayment gradually. 

If a QDRO awarded a fixed percentage

of the participant’s benefit to the alternate

payee and provided no guidance on benefit

adjustments, PBGC would proportionally

adjust the benefits payable to both the

participant and the alternate payee to reflect

PBGC’s adjustments to the participant’s

total benefit. If a QDRO awarded a fixed

dollar amount of the participant’s benefit to

the alternate payee with no additional

guidance, PBGC would first increase or

decrease the participant’s benefit to reflect

PBGC’s adjustment. The fixed dollar

amount awarded to the alternate payee

would not be adjusted for an increase and

would be reduced only if the total decrease

to be made exceeded the participant’s

benefit.

Section 5. Benefits Start

Indicate the date on which the alternate

payee’s benefit payments should begin. The

models allow for benefits to commence on a

specific date, an election by the alternate

payee, or submission of the order. The PBGC

Model Separate Interest QDRO may not be

used if the participant’s benefit payments have

commenced. The PBGC Model Shared

Payment QDRO does not allow the alternate

payee’s payments to commence until the

participant starts payments. The appropriate

insert will depend in part on whether the

participant has commenced payments. 
17

The parties must decide whether they

want the alternate payee to have the right to

begin receiving benefit payments before the

participant does. The PBGC Model

Separate Interest QDRO permits the

alternate payee to specify the date his or her

benefits will commence or to choose a

commencement date at some later time.

Payments to the alternate payee may begin

as early as the participant’s “earliest

retirement age” (or earlier, if specifically

allowed by the plan) even if the participant

is still working. Payments must begin no

later than the date required under section

401(a)(9) of the Code (see Appendix C).

The “earliest retirement age” has a

specific statutory meaning for purposes of

QDROs. If the participant is still employed

by the employer who maintained the plan,

the earliest retirement age is the earliest age

(but not earlier than age 50) the participant

could receive benefits under the plan if the

participant were to separate from service. If

the participant is not actively employed, the

earliest retirement age is the earliest age the

participant could choose to begin receiving

benefits. 

Example 4. Continuing with Example 1,

the Separate Interest QDRO allows Mark

to start his benefit payments without

regard to when Carol’s benefit payments

start. For example, Mark may want to

begin receiving benefit payments at age 60

when Carol will be only 50 years old. If

Mark and Carol had used a Shared

Payment QDRO and Carol did not

commence benefits until age 65 (normal

retirement age under the plan), Mark

would not be able to begin receiving

benefit payments until age 75.

The PBGC Model Shared Payment

QDRO provides the alternate payee with a

portion of the participant’s benefit

payments during the period that the

participant receives benefits. If the

participant is already receiving benefit

payments, the alternate payee under the

PBGC Model Shared Payment QDRO can

begin receiving benefits immediately. If the

participant has not begun receiving benefit

payments, the alternate payee cannot begin

receiving payments until the participant

does.

Example 5. Continuing with Example 2,

PBGC will not begin paying benefits to

Jane under the Shared Payment QDRO

until the time that Dick begins receiving

his benefit payments.

Section 6. Form of Benefit 

Indicate the form of benefit to be paid to

the alternate payee. Generally, under the

PBGC Model Separate Interest QDRO the

form of the alternate payee’s benefit will be a

single life annuity. The PBGC Model Shared

Payment QDRO specifies that PBGC pays the

alternate payee’s benefits at the same time as it

pays benefits to the participant.

Generally, if a QDRO is issued after

PBGC becomes trustee of a plan, the only

form that PBGC will pay the alternate

payee as a separate interest is a single life

annuity for the life of the alternate payee.
18

However, the PBGC Model Separate

Interest QDRO allows payment of a

temporary life annuity for child support or

alimony. Parties or their representatives

should contact PBGC before including any

other benefit form in a QDRO to make

certain it is a form that PBGC pays.

Example 6. Continuing with Example 1,

the Separate Interest QDRO could

provide that Mark will receive benefits as a

life annuity, actuarially adjusted to reflect

the date payments begin and his life

expectancy. Alternatively, assuming that

the plan allowed payments before the

earliest retirement age, the QDRO could

provide that Mark’s benefit is payable as a

temporary life annuity for alimony. Either

benefit will have the same value as a $300

per month benefit payable to Carol over

her lifetime beginning at her age 65.

In the PBGC Model Shared Payment

QDRO, the alternate payee must receive his

or her payments as an annuity ending on

the earliest of the death of the participant,

the death of the alternate payee, or the

occurrence of a specified event. The

alternate payee cannot change the form of

benefit payments selected by the

participant. However, the PBGC Model

Shared Payment QDRO (like the PBGC

Model Separate Interest QDRO) can

provide spousal rights and thus affect the

form of benefit payment that the

participant can receive. For example,

section 10 of either model QDRO can

provide that the participant’s former

spouse, as the alternate payee, will be

treated as the participant’s spouse for

purposes of all or part of the benefit. For

the portion of the benefit for which the

alternate payee is treated as the spouse, the

participant cannot choose a form of benefit

other than a joint and survivor annuity

with the former spouse as the beneficiary

without the former spouse’s consent at the

time the pension is to begin. 

Example 7. Continuing with the Shared

Payment QDRO in Example 2, PBGC

will begin paying Jane’s portion of Dick’s

benefit no earlier than the time that Dick

begins receiving his benefit payments. If

the QDRO gives Jane spousal rights, Dick

must elect a joint and survivor annuity

with Jane as beneficiary, unless Jane

consents to Dick’s election of another

benefit form.

Section 7. Benefits Stop 

Indicate when benefits will stop for the

alternate payee. This is generally governed by

the form specified in section 6. 

Once benefit payments to the participant

or the alternate payee have started, the form

of benefit will govern when benefits stop.

For example, the form may provide that

payments to an alternate payee will stop on

the participant’s death or upon specific

events such as the remarriage of the alternate

payee or the date a child attains a certain age. 

Section 8. Death of Participant 

Indicate what happens to payments when

the participant dies. 
19

The PBGC Model Separate Interest

QDRO provides that PBGC will pay the

separate interest to the alternate payee

regardless of when the participant dies.

The PBGC Model Shared Payment

QDRO provides that payment of a benefit

to an alternate payee stops upon the death

of the participant (except to the extent the

alternate payee is to be treated as the

surviving spouse under section 10). 

Section 9. Death of Alternate Payee 

Indicate what happens when the alternate

payee dies. In the PBGC Model Separate

Interest QDRO, the focus is on the alternate

payee’s dying before commencing benefit

payments. (If benefits have started, the form

chosen governs and there generally will be no

survivor benefits.) In the PBGC Model Shared

Payment QDRO, the focus is on the alternate

payee’s dying before the participant. In both

cases, indicate whether there is a contingent

alternate payee and, if so, when the contingent

alternate payee receives benefits and how much.

The PBGC Model Separate Interest

QDRO addresses what happens to the

alternate payee’s benefit if the alternate

payee dies before he or she commences

benefit payments. If the Separate Interest

QDRO is silent on what happens if the

alternate payee dies before commencing

benefit payments, PBGC will treat the

separate interest as being forfeited to PBGC.

However, the QDRO could provide for a

contingent alternate payee (such as a child)

to get a separate interest if the alternate

payee dies before commencing benefits.

The QDRO also could name the child as

the alternate payee or as a second (rather

than contingent) alternate payee. The

parties could also provide that, if the

alternate payee (or a contingent alternate

payee) dies before commencing benefits, the

value of the separate interest returns to the

participant. The Separate Interest QDRO

cannot provide for the benefit to go to the

alternate payee’s estate.

The PBGC Model Shared Payment

QDRO addresses what happens to the

alternate payee’s benefit if the alternate

payee dies before the participant dies

(whether or not benefit payments have

commenced to the alternate payee). If the

Shared Payment QDRO is silent on any

other arrangement and the alternate payee

(and any contingent alternate payee) dies

before the participant, the participant’s

monthly benefit payments will be returned

to the amount that the participant would be

receiving had there been no QDRO. The

alternate payee cannot pass payments on to

another beneficiary upon death. However,

as with the PBGC Model Separate Interest

QDRO, the PBGC Model Shared Payment

QDRO could be drafted to cover multiple

or contingent alternate payees, such as

payments to the former spouse alternate

payee and then, upon the former spouse’s

death, to the children as contingent

alternate payees until they reach the age of

majority. 

Example 8. Continuing with the Shared

Payment QDRO in Example 2, Dick

retires and commences his pension benefits
20

as a joint and survivor annuity. Jane

receives a 25% share of Dick’s benefit

payments. Two years after commencing

benefit payments, Jane dies. Because their

Shared Payment QDRO did not name a

contingent alternate payee, Jane’s portion

of Dick’s benefit payments reverts to Dick

at Jane’s death.

Section 10. Spousal Rights of 

Former Spouse as 

Alternate Payee 

Indicate whether the alternate payee will be

treated as the spouse of the participant for

purposes of part or all of the preretirement

survivor annuity and/or the joint and

survivor annuity. If the alternate payee is to

be treated as the spouse for all of the benefit in

which the participant retains a separate

interest or for the participant’s accrued benefit

insert 100%. Otherwise insert the percentage

or amount with respect to which the alternate

payee will be treated as the spouse.

If a participant dies before starting

benefit payments, PBGC pays the

participant’s surviving spouse a

preretirement survivor annuity. If a

participant dies after starting benefit

payments in the form of a qualified joint

and survivor annuity (QJSA), PBGC pays

the participant’s surviving spouse the

survivor portion of the QJSA. Under

either model QDRO, the participant’s

former spouse, as the alternate payee, can be

treated as the surviving spouse (even if the

participant has remarried) for all or only a

portion of the survivor benefit of a

participant who has not yet begun to

receive payments. Thus, the alternate payee

can be designated as the spouse for the

preretirement survivor annuity and/or the

qualified joint and survivor annuity with

respect to either the participant’s accrued

benefit or the portion of the accrued

benefit in which the participant retains a

separate interest. These survivor benefits

would be in addition to any separate interest

or shared payment the alternate payee

already has a right to receive. PBGC will

pay survivor benefits in accordance with

the terms of the QDRO even if the

participant has designated a different

beneficiary or has remarried.

Example 9. Continuing with the

Separate Interest QDRO in Example 1,

Carol dies in an accident at age 35. Mark’s

separate interest in Carol’s pension benefit

is unaffected by her death. However,

assuming the QDRO is silent as to

survivor benefits, and because Carol and

Mark were not married at the time of

Carol’s death, Mark is not treated as

Carol’s spouse and will not receive a

preretirement survivor benefit.

Example 10. Continuing with the Shared

Payment QDRO in Example 2, assume

the QDRO provides that Jane will be

treated as Dick’s spouse for purposes of

survivor benefits. When Dick retires, his

pension benefits commence as a joint and

50% survivor annuity. Under the terms of

their Shared Payment QDRO, Jane receives
21

a 25% portion of the total annuity benefit

payable during Dick’s life. Three years

after commencing benefit payments, Dick

dies. Under the terms of their QDRO,

Jane’s 25% portion of Dick’s benefit

payments stops at Dick’s death. However,

Jane will receive a survivor annuity for her

lifetime equal to 50% of the total annuity

benefit.

Section 11. Compliance with 

Applicable Laws 

The provisions in this section should be in

all QDROs submitted to PBGC and the

parties’ attorneys or representatives should

ensure that the provisions are met.

Section 12. Reservation of Jurisdiction

Include the necessary language for the court

issuing the domestic relations order to retain

jurisdiction over the Order.
22

Benefit Payments During the Domestic

Relations Order Review. After PBGC

receives a certified or authenticated

domestic relations order, PBGC will

suspend payment to the participant of any

amounts that the domestic relations order

would give to the alternate payee. 

If PBGC determines that the order is

qualified, PBGC will begin making

payments (including any suspended

payments) to the alternate payee under the

QDRO as soon as the 45-day period for

filing an appeal has elapsed and the

alternate payee has completed an

application that provides the necessary

personal data. If an appeal is filed or a suit

is filed in court, PBGC will continue to

suspend payment of the benefits in

controversy until the appeal or suit is

resolved. 

If PBGC determines that the order is not

qualified, PBGC will lift the suspension and

make any back payments to the participant

as soon as the 45-day period for filing an

appeal has elapsed unless an appeal is filed,

PBGC is notified in writing that the parties

are trying to make the necessary changes in

the domestic relations order, or there is a

court proceeding. 

In no case will PBGC suspend payments

for more than 18 months from the date the

first payment to the alternate payee would

have been due under the order. PBGC will

pay suspended benefits with interest.

PBGC will review a domestic relations

order certified or otherwise authenticated

under state domestic relations procedures to

determine whether the order is qualified

and will inform the interested parties in

writing of its determination. Interested

parties include all parties named in the

QDRO, their attorneys (if identified), and

any representative designated in writing by

the parties.

If PBGC determines the order is not a

QDRO, PBGC will explain the reason

along with its procedures for appealing the

determination. An appeal, or a request for

an extension of time to appeal, must be

filed within 45 days after the date of

PBGC’s determination.

At the request of a participant or an

alternate payee (or either of their

representatives), PBGC will informally

review a domestic relations order in draft

form to see if it will satisfy qualification

requirements. After PBGC has reviewed a

draft domestic relations order, the alternate

payee should submit, as soon as possible, a

certified or authenticated copy of the final

order to PBGC for approval.

III Procedures and Checklist

To submit a domestic relations

order to PBGC (or a draft order for a

preliminary, informal review), send it

to the PBGC QDRO Coordinator,

P.O. Box 19153, Washington, D.C.

20036-0153.
23

Change of Address or Entitlement

Status. PBGC should be notified

immediately of any change in address. It is

also important to notify PBGC promptly if

an event occurs that affects benefits PBGC

is paying or will pay. For example, if

payments to the alternate payee would end

on a future event such as remarriage or a

child’s reaching a certain age, PBGC should

be immediately notified when that event

occurs. If payments are improperly made

by PBGC after the event, PBGC will seek

to recover overpayments. PBGC is not

obligated to change the participant’s benefit

to reflect the event until PBGC is notified

of the event.

Checklist

PBGC uses the following checklist to

review domestic relations orders, including

orders that use the PBGC Model QDROs,

that are received after PBGC trustees a plan: 

✓ Does the order clearly specify the

PBGC-trusteed pension plan to which

it applies?

❏ Does the order clearly identify the

defined benefit pension plan (e.g.,

formal plan name)?

❏ Is the plan trusteed by PBGC?

✓ Does the order include the names of

the persons to which it applies?

❏ Does the order clearly identify the

participant (e.g., full name, last

known mailing address, and Social

Security Number)?

❏ Does the order clearly identify each

alternate payee and each contingent

alternate payee (e.g., full name, last

known mailing address, and Social

Security Number)?

❏ Does the order provide the name

and address of the legal

representative for alternate payees

who are minors or legally

incompetent?

✓ Does the order specify the amount to

be paid to each alternate payee, the

length of time for the payment, and

the manner in which it will be paid?

❏ Does the order clearly specify the

amount or percentage (or state how

to determine the amount or

percentage) of the participant’s

accrued benefit or monthly benefit

payment to be paid to each alternate

payee?

❏ Does the order clearly specify (or

allow a future election that would

specify) when payments will

commence for each alternate payee?

❏ Is it clear that the order does not

require PBGC to pay benefits that

have a value in excess of the value of

benefits to which the participant

would otherwise be entitled from

PBGC?

❏ Is it clear that the order does not

require PBGC to provide any type

or form of benefit, or any option,

that PBGC does not otherwise

provide to participants and alternate

payees with respect to the plan?
24

❏ Is it clear that the order does not

require PBGC to pay benefits to an

alternate payee that are required to

be paid to another alternate payee

under a previous QDRO?

❏ Is it clear that the order does not

require PBGC to pay benefits to an

alternate payee in an amount or

form that is not permitted under the

Code or ERISA?

❏ Does the order clearly require

payment to the alternate payee

(rather than to the participant for

payment to the alternate payee)?

✓ What happens when the participant

dies?

❏ Does the order specify whether the

participant’s former spouse, as the

alternate payee, is to be treated as the

participant’s spouse with respect to

all or part of the participant’s

remaining separate interest or

participant’s benefit for purposes of

the preretirement survivor annuity

and/or the qualified joint and

survivor annuity?

✓ What happens when the alternate

payee dies?

❏ Does the order clearly specify what

happens to the alternate payee’s

separate interest, if any, when the

alternate payee dies before

commencing benefits?

❏ Does the order clearly specify what

happens to the participant’s benefit

when the alternate payee predeceases

the participant?

✓ Was the order issued under a State

domestic relations law?

❏ Was the order entered by a court of

competent jurisdiction?

❏ Is the order a judgment, decree, or

order (including approval of a

property settlement agreement)?

❏ Does the order relate to the

provision of child support, alimony

payments, or marital property rights

to a spouse, former spouse, child, or

other dependent of a participant?

❏ Is the order made pursuant to a State

domestic relations law (including a

community property law)?
25

Accrued Benefit – The benefit the

participant has earned under the plan.

Actuarially Equivalent – Having the same

value as of a given date using the same

assumptions. 

Alternate Payee – A participant’s spouse,

former spouse, child, or other dependent

who, under a Qualified Domestic Relations

Order, has a right to receive all, or a

portion of, the participant’s pension

benefits under a plan.

Annuity – A form of benefit in which

payments are made at regular intervals for a

specified period of time. The most common

form of annuity pays monthly benefits for

life.

Beneficiary – The person named to receive

benefits upon the death of a participant or

alternate payee.

Contingent Alternate Payee – An alternate

payee whose benefit is contingent upon the

death of another alternate payee or some

other event.

Defined Benefit Plan – A type of pension

plan that promises participants specified

benefits at retirement. Retirement benefits

usually are based on the number of years

worked for a company or in an industry

and may also be based on salary during that

time.

IV Glossary

Defined Contribution Plan – A type of

pension plan in which an employer

contributes to individual participant

accounts. In some defined contribution

plans, participants may also contribute

money. Retirement benefits are based on

the amount in each participant’s account,

adjusted for investment experience. The

most common types of defined

contribution plans include profit-sharing

plans, 401(k) plans, employee stock

ownership plans (ESOPs), and thrift savings

plans.

Domestic Relations Order – Any

judgment, decree, or order (including

approval of a property settlement

agreement) that (1) provides child support,

alimony payments, or marital property

rights to a spouse, former spouse, child, or

other dependent of a participant, and (2) is

made pursuant to a state domestic relations

law.

Earliest Retirement Age – For purposes of

the QDRO rules, earliest retirement age is

the earlier of (1) the date the participant is

entitled to a payment of benefits under the

plan, or (2) the later of (a) the date the

participant reaches age 50 or (b) the earliest

date the participant could begin to receive

benefits if he or she no longer worked for

the company. 

The following terms may be useful in understanding this booklet. These definitions are

simplified and apply to the information discussed in this booklet. 
26

Guaranteed Benefits – The amount of

pension benefits insured by PBGC.

Joint and Survivor Annuity – An annuity

that pays benefits over the recipient’s

lifetime and over the lifetime of the person

named as beneficiary.

Life Expectancy – The number of years a

person is expected to live, on average, after a

given age.

Lump Sum – A form of benefit payment in

which the entire benefit is paid at one time.

Normal Retirement Age – The age at

which a participant can retire under the

plan and receive a full pension benefit. In

most cases, the normal retirement age will

not be greater than 65 years of age.

Participant – A member of a pension plan.

A participant is said to participate in or to

be covered by the plan.

PBGC Model Separate Interest QDRO –

The PBGC Model Separate Interest QDRO

divides the participant’s benefits into two

separate parts — one for the participant and

one for the alternate payee.

PBGC Model Shared Payment QDRO –

The PBGC Model Shared Payment QDRO

gives the alternate payee a portion of the

participant’s benefit payments under the

plan during the participant’s lifetime. In

other words, the participant and the

alternate payee share the payments.

Plan Administrator – The person or

persons who administer the plan. If the

name of the administrator is not in the plan

document, the employer is considered to be

the plan administrator.

Preretirement Survivor Annuity – The

form of QPSA paid by PBGC.

Qualified Domestic Relations Order

(QDRO) – A QDRO is a domestic

relations order that gives an alternate payee

the right to receive all or a portion of the

benefits payable to a participant under the

plan, and meets certain other legal

requirements with respect to the

information and benefits involved.

Qualified Joint and Survivor Annuity

(QJSA) – A QJSA is a joint and survivor

annuity where (1) the participant receives a

definite amount of money at regular

intervals for life, and (2) after the

participant dies, the surviving spouse

receives a definite amount of money (not

less than 50% or more than 100% of the

participant’s amount) at regular intervals for

life.

Qualified Preretirement Survivor

Annuity (QPSA) – A QPSA is an annuity

provided to a surviving spouse when the

participant dies before receiving payment of

his or her benefit. The annuity is for the

life of the surviving spouse, is calculated

based on the benefit that had been earned

when the participant died, and generally is

equal to the survivor’s portion of the QJSA.
27

Single Life Annuity – An annuity that

pays benefits over the recipient’s lifetime.

Also known as a straight-life annuity. Once

the recipient dies, there are no further

annuity payments.

Spouse – Husband or wife as determined

under applicable state law. A QDRO can

provide that the participant’s former spouse

be treated as the participant’s spouse.

Spousal Consent – A spouse’s agreement

to allow the participant to waive the QPSA

or elect a form of benefit other than a

QJSA.

Survivor Benefit – The benefit a survivor

receives after the participant dies.

Temporary Life Annuity – An annuity

that pays benefits over the shorter of the

recipient’s life or a specified period.

Value – The actuarially estimated amount

needed at a point in time to provide

monthly benefits in the future. Value

depends on the amount of the monthly

benefit payment, when the benefit

payments start and stop, age(s) of the

recipient(s), mortality assumptions, and

interest assumptions. Also referred to as

“present value” or “actuarial present value.”
28

Defined Benefit Pension Plans

There are two basic types of pension

plans: defined benefit plans and defined

contribution plans. PBGC insures benefits

in most private-sector defined benefit plans.

PBGC does not insure benefits in defined

contribution plans, such as 401(k) plans. 

A defined benefit plan promises each

participant a specified benefit at retirement.

The benefit usually is based on a formula

such as the number of years a participant

has worked for a company and/or the

participant’s salary for the last few years of

work.

Defined benefit plans may pay

retirement benefits in a variety of ways.

The most common form of benefit

payment is an annuity. Normally, annuity

payments are paid over the participant’s life,

or over the lives of the participant and a

beneficiary.

A participant will automatically receive

his or her benefit in the form of an annuity

unless the participant chooses (with spousal

consent, if married) a different form of

payment. An unmarried participant

usually will receive an annuity for his or

her life. A married participant usually will

receive a qualified joint and survivor

annuity (QJSA), unless the participant has

waived it with spousal consent.

If a married participant dies after

starting to receive retirement benefits, the

participant’s spouse will receive the

Appendix A — Defined Benefit Pension Plans and 

PBGC Benefit Rules

survivor portion of the QJSA, unless the

participant has waived the QJSA with

spousal consent. If a married participant

dies before starting to receive retirement

benefits, the participant’s spouse will

receive a qualified preretirement survivor

annuity (QPSA), unless the participant has

waived the QPSA with spousal consent.

A plan may distribute a participant’s

benefit immediately as a lump sum without

the participant’s election (or the

participant’s spouse’s consent) if the value

of the lump sum is not greater than $3,500.

Many defined benefit plans offer

participants a choice of times at which they

may retire — early, normal, or late

retirement. The time a participant chooses

to retire usually will affect the amount of

pension benefits the participant receives. In

most plans, the longer a participant waits to

start receiving benefits, the larger the

benefit payments will be.

PBGC Benefit Rules

PBGC guarantees most, but not all,

pension benefits in plans that it insures.

PBGC does not guarantee certain death and

supplemental benefits and may guarantee

only part of benefit increases resulting from

plan amendments within five years before

the plan terminates. In addition, ERISA

sets a maximum limit on the benefit that

PBGC guarantees. For example, for

pension plans terminating in 1996, the

maximum guaranteed amount generally is
29

$2,642.05 per month ($31,704.60 per year).

This maximum amount generally is reduced

for a retiree who is younger than age 65

when the plan terminates and for

participants and beneficiaries who begin

receiving benefit payments after the plan

terminates but before reaching age 65. The

maximum amount also is reduced if

benefits will be paid in a form other than a

single life annuity. PBGC may pay more

than the maximum guaranteed amounts if

the plan has enough assets or if PBGC

recovers amounts from employers.

For participants who have started

receiving benefit payments or have properly

chosen a benefit form before their plan

terminates, PBGC generally will pay

benefits in the form they had chosen. For

participants who have not started to receive

benefits or have not chosen a benefit form

at the time their plan terminates, PBGC

generally will pay benefits in the plan’s

automatic form, generally a single life

annuity for an unmarried participant (or a

married participant who has obtained

spousal consent) and a qualified joint and

survivor annuity for a married participant.

PBGC will pay a lump sum if the value of

the benefit is not in excess of $3,500 at plan

termination. For these purposes, a plan

will be considered to have terminated on

the latest of the plan’s termination date, the

proposed termination date, or the date

PBGC instituted proceedings for

involuntary termination of the plan if no

notice of intent to terminate was issued. 
30

While this booklet deals with QDROs

issued after PBGC becomes trustee of a

plan, PBGC also receives and administers

QDROs in two other situations: (i) where

PBGC becomes trustee of a plan that is

already paying benefits pursuant to a

QDRO and (ii) where PBGC becomes

trustee of a plan that has a QDRO already

approved by the plan administrator but

payments under the QDRO will not begin

until sometime in the future.

When PBGC becomes trustee of a plan

that has QDROs already approved by the

plan administrator, PBGC reviews the

QDROs to see if there is anything in the

QDROs that would make them no longer

qualified under its rules. If any issues arise,

PBGC communicates with the parties to

the QDRO.

Because PBGC guarantees may not

cover a participant’s full pension benefit, a

participant’s benefit in some cases may be

reduced after PBGC takes over a plan. This

can reduce benefits payable to one or both

parties under the QDRO. PBGC will not

treat the order as not qualified solely

because benefits paid by PBGC require

reduction of the participant’s and/or the

alternate payee’s benefit. PBGC will apply

the reduction rules here (assuming the

QDRO is silent) in the same manner as it

applies the reduction rules to QDROs that

are issued after PBGC becomes trustee. For

Appendix B — QDROs Issued Before PBGC Becomes Trustee

example, if a QDRO awarded a fixed

percentage of the participant’s benefit to the

alternate payee, the benefits payable to both

the participant and the alternate payee

would be reduced to reflect PBGC’s

guarantee limitations. On the other hand,

if a QDRO awarded a fixed dollar amount

of the participant’s benefit to the alternate

payee, the participant’s benefit would be

reduced first to reflect PBGC’s guarantee

limitations. The fixed dollar amount

awarded to the alternate payee would be

reduced only if the total decrease to be

made exceeded the participant’s benefit. 

If the parties want a different result, the

QDRO (or an amended QDRO) should

state the appropriate way to apply the

reductions.

PBGC guarantee limitations apply to

QDROs issued before PBGC becomes

trustee, but PBGC benefit form limitations

apply to the alternate payee’s benefit

payments or elections under these pretrusteeship QDROs only where the QDRO

was issued after the plan terminated. For

this purpose, a plan will be considered to

have terminated on the latest of the plan’s

termination date, the proposed termination

date, or the date PBGC instituted

proceedings for involuntary termination of

the plan if no notice of intent to terminate

was issued. 
31

The following information is not

intended to be tax advice. Any questions

on tax matters should be directed to a tax

advisor or the IRS.

Pension benefits are taxable when they

are paid to the participant or, in some cases,

to the alternate payee. Internal Revenue

Service Publication 575, Pension and

Annuity Income, explains these rules. A

local IRS office will be able to provide this

publication, or it may be obtained by

calling 1-800-TAX FORM.

Benefit payments are taxable to the plan

participant, except for payments made

under a QDRO directly to an alternate

payee who is a spouse or former spouse.

This means, for example, that the plan

participant is taxed on payments under a

QDRO to a plan participant’s children. It

also means that payments made other than

directly to the spouse or former spouse (for

example, to the participant for the former

spouse) are taxed to the participant.

In some cases plan participants have

made their own contributions to their plan.

When pension benefits are paid, a portion

of each benefit payment is a return of some

Appendix C — QDRO Tax Rules

of these contributions. Because these

contributions were already taxed before

they were contributed to the plan, they will

not be taxed again when they are paid out

from the plan. The tax law provides

detailed rules for determining what portion

of each payment is a tax-free return of the

participant’s contributions.

There is generally an additional 

10 percent tax on non-annuity payments

that are made before age 59 1/2. However,

this 10 percent tax does not apply to

payments made to an alternate payee under

a QDRO. There are special rules regarding

rollovers of amounts paid to alternate

payees.

Section 401(a)(9) of the Code specifies

the date by which distributions must

commence. Question and Answer H-4 of

the proposed Treasury regulation section

1.401(a)(9)-1 addresses how the required

minimum distribution rules of section

401(a)(9) of the Code apply to the separate

interest of an alternate payee. The proposed

regulation limits the period over which

benefits may be paid with respect to the

alternate payee’s separate interest, thereby

limiting what survivor benefits may be paid.
32

Notes
For information about a pension plan that PBGC has

trusteed, benefit information with respect to a participant in

such a plan, or information about Qualified Domestic

Relations Orders, call PBGC’s Customer Service Center,

1-800-400-PBGC, or write to PBGC QDRO Coordinator,

P.O. Box 19153, Washington, D.C. 20036-0153.

To submit a domestic relations order to PBGC (or a draft

order for a preliminary, informal review), send it to the

PBGC QDRO Coordinator, P.O. Box 19153,

Washington, D.C. 20036-0153.
PBGC Publication 1005

September 1996