Introduction

More than 48 million private wage and salary workers are currently covered by employerprovided pension plans in the United States. For many of these Americans, pension

savings represent one of their most significant assets. For this reason, whether and how to

divide a participant’s interest in a pension plan are often important considerations in

separation, divorce, and other domestic relations proceedings. While the division of marital

property generally is governed by state domestic relations law, any assignments of pension

interests must also comply with Federal law, namely the Employee Retirement Income

Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (the Code). Under

ERISA and the Code, pension interests may be assigned only if the judgment, decree, or

order creating or recognizing a spouse’s, former spouse’s, child’s, or other dependent’s

interest in an individual’s pension benefits constitutes a “qualified domestic relations order”

or “QDRO.”

This booklet was prepared by the Employee Benefits Security Administration (EBSA) of

the U.S. Department of Labor to provide general guidance about QDROs1 to employers,

pension plan administrators, participants, beneficiaries, employee benefit professionals,

and domestic relations specialists. The views expressed in this booklet represent the

views of the Department of Labor.

Chapter 1 provides a general overview of the QDRO provisions and the basic rules

governing the content of QDROs.

Chapter 2 focuses on the duties of pension plan administrators in making QDRO

determinations and in administering pension plans for which related QDROs have been

issued.

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The Department of Labor has jurisdiction to interpret the QDRO provisions set forth in section 206(d)(3) of

ERISA and section 414(p) of the Code (except to the extent provided in section 401(n) of the Code) and the

provisions governing fiduciary duties owed with respect to domestic relations orders and QDROs. This booklet

was developed in consultation with the Department of the Treasury and the Internal Revenue Service.
Chapter 3 focuses on issues to be considered in drafting a QDRO. This chapter also

discusses the provisions of section 205 of ERISA, which are substantially parallel to the

provisions contained in sections 401(a)(11) and 417 of the Code to the extent these

sections apply to QDROs. The provisions of section 205 require that pension plans

provide the spouses of pension plan participants with certain rights to survivor benefits,

which are relevant to the provisions governing QDROs. Sample QDRO language developed

by the Department of the Treasury and the Internal Revenue Service, in consultation with

the Department of Labor, is provided in Appendix C.

It is the hope of EBSA that the information furnished in this booklet will promote better

understanding of the rights and obligations of those involved in domestic relations proceedings

and those responsible for administering pension plans.2 A better understanding of these

provisions of law should reduce the costs and burdens associated with QDRO

determinations for both pension plans and the affected individuals.

The Department recognizes that this booklet does not answer every question that may

arise in the development and administration of QDROs. In this regard, the Department is

willing to consider addressing specific issues through its advisory opinion process (but see

Question 1-14 regarding advisory opinion requests on whether a domestic relations order

is a QDRO). The ERISA Advisory Opinion Procedure governing this process is set forth

in Appendix B of this booklet.

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As used in this booklet, the term “pension plan” refers to that term as defined in section 3(2) of ERISA and

means generally any plan established or maintained by an employer or an employee organization (or both) that

provides retirement income to employees or results in the deferral of income by employees for periods extending

to the termination of covered employment or beyond.

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Chapter 1

Qualified Domestic Relations Orders:

An Overview

This chapter includes a general overview of the provisions of Federal law governing the

assignment of pension benefits in a domestic relations proceeding and the requirements

that apply in determining whether a domestic relations order is a QDRO. The following

areas are addressed:

Who can be an “alternate payee”?

What information must be included in a domestic relations order in order for it to

be “qualified”?

Who determines whether a domestic relations order is a QDRO?

In general, ERISA and the Code do not permit a participant to assign or alienate the

participant’s interest in a pension plan to another person. These “anti-assignment and

alienation” rules are intended to ensure that a participant’s pension benefits are actually

available to provide financial support during the participant’s retirement years. A limited

exception to the anti-assignment and alienation rules is provided for assignments of pension

benefits through qualified domestic relations orders (QDROs).

Under the QDRO exception, a domestic relations order may assign some or all of a participant’s

pension benefits to a spouse, former spouse, child, or other dependent to satisfy family support

or marital property obligations if and only if the order is a “qualified domestic relations order.”

ERISA requires that each pension plan pay benefits in accordance with the applicable

requirements of any “qualified domestic relations order” that has been submitted to the plan

administrator. The plan administrator’s determinations on whether a domestic relations order is

a QDRO, therefore, have significant implications for both the parties to a domestic relations

proceeding and the plan. The following questions and answers are intended to provide an

overview of the Federal requirements a domestic relations order must satisfy to be considered

a QDRO.

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1-1: What is a What is a Qualified Domestic Relations Order?

A “qualified domestic relation order” (QDRO) is:

a domestic relations order

that creates or recognizes the existence of an “alternate payee’s” right

to receive, or assigns to an alternate payee the right to receive, all or a

portion of the benefits payable with respect to a participant under a

pension plan, and

that includes certain information and meets certain other requirements.

See Questions 1-5 and 1-6.

Question 1-4 explains who may be an “alternate payee.”

[ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)]

1-2: What is a What is a “domestic relations order domestic relations order”?

To be recognized as a QDRO, an order must be a “domestic relations

order.” A domestic relations order is:

a judgment, decree, or order (including the approval of a property

settlement)

that is made pursuant to state domestic relations law (including

community property law) and

that relates to the provision of child support, alimony payments, or

marital property rights for the benefit of a spouse, former spouse,

child, or other dependent of a participant.

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A state authority, generally a court, must actually issue a judgment, order,

or decree or otherwise formally approve a property settlement agreement

before it can be a “domestic relations order” under ERISA. The mere

fact that a property settlement is agreed to and signed by the parties will

not, in and of itself, cause the agreement to be a domestic relations order.

There is no requirement that both parties to a marital proceeding sign or

otherwise endorse or approve an order. It is also not necessary that the

pension plan be brought into state court or made a party to a domestic

relations proceeding for an order issued in that proceeding to be a “domestic

relations order” or a “qualified domestic relations order.” Indeed, because

state law is generally preempted to the extent that it relates to pension

plans, the Department takes the position that pension plans cannot be

joined as a party in a domestic relations proceeding pursuant to state law.

Moreover, pension plans are neither permitted nor required to follow the

terms of domestic relations orders purporting to assign pension benefits

unless they are QDROs.

[ERISA §§ 206(d)(3)(B)(ii), 514(a), 514(b)(7); IRC § 414(p)(1)(B)]

1-3: Must a “domestic relations order domestic relations order” be issued by a

state court?

No. A domestic relations order may be issued by any state agency or

instrumentality with the authority to issue judgments, decrees, or orders,

or to approve property settlement agreements, pursuant to state domestic

relations law (including community property law).

[ERISA § 206(d)(3)(B)(ii); IRC § 414(p)(1)(B); Advisory Opinion 2001-

06A (Appendix A)]

1-4: Who can be an Who can be an “alternate payee”?

A domestic relations order can be a QDRO only if it creates or recognizes

the existence of an alternate payee’s right to receive, or assigns to an

alternate payee the right to receive, all or a part of a participant’s benefits.

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For purposes of the QDRO provisions, an alternate payee cannot be

anyone other than a spouse, former spouse, child, or other dependent of

a participant.

[ERISA § 206(d)(3)(K), IRC § 414(p)(8)]

1-5: What information must a domestic relations order What information must a domestic relations order

contain to qualify as a QDRO under ERISA?

QDROs must contain 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.

[ERISA § 206(d)(3)(C)(i)-(iv); IRC § 414(p)(2)(A)-(D)]

1-6: Are there other requirements that a domestic

relations order must meet to be a QDRO?

Yes. There are certain provisions that a QDRO must not contain:

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

(determined on the basis of actuarial value);

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; and

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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.

[ERISA §§ 206(d)(3)(D)(i)-(iii), 206(d)(3)(E)(i)(III);

IRC §§ 414(p)(3)(A)-(C), 414(p)(4)(A)(iii)]

1-7: May a QDRO be part of the divorce decree or May a QDRO be part of the divorce decree or

property settlement?

Yes. There is nothing in ERISA or the Code that requires that a QDRO

(that is, the provisions that create or recognize an alternate payee’s interest

in a participant’s pension benefits) be issued as a separate judgment, decree,

or order. Accordingly, a QDRO may be included as part of a divorce

decree or court-approved property settlement, or issued as a separate

order, without affecting its “qualified” status. The order must satisfy the

requirements described above to be a QDRO.

[See generally ERISA § 206(d)(3)(B); IRC § 414(p)(1)]

1-8: Must a domestic relations order be issued as part Must a domestic relations order be issued as part

of a divorce proceeding to be a QDRO?

No. A domestic relations order that provides for child support or recognizes

marital property rights may be a QDRO, without regard to the existence

of a divorce proceeding. Such an order, however, must be issued pursuant

to state domestic relations law and create or recognize the rights of an

individual who is an “alternate payee” (spouse, former spouse, child, or

other dependent of a participant).

An order issued in a probate proceeding begun after the death of the

participant that purports to recognize an interest with respect to pension

benefits arising solely under state community property law, but that doesn’t

relate to the dissolution of a marriage or recognition of support obligations,

is not a QDRO because the proceeding does not relate to a legal separation,

marital dissolution, or family support obligation.

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[ERISA § 206(d)(3)(B); IRC § 414(p)(1); Advisory Opinion 90-

46A (Appendix A); see Egelhoff v. Egelhoff 121 S.Ct. 1322, 149 L.

Ed.2d 264 (2001); Boggs v. Boggs, 520 U.S. 833, 117 S.Ct. 1754

(1997)]

1-9: May a QDRO provide for payment to the guardian

of an alternate payee?

Yes. If an alternate payee is a minor or is legally incompetent, the order

can require payment to someone with legal responsibility for the alternate

payee (such as a guardian or a party acting in loco parentis in the case

of a child, or a trustee as agent for the alternate payee).

[See Staff of the Joint Committee on Taxation, Explanation of

Technical Corrections to the Tax Reform Act of 1984 and Other

Recent Tax Legislation, 100th Cong., 1st Sess. (Comm. Print 1987)

at 222]

1-10: Can a QDRO cover more than one plan?

Yes. A QDRO can assign rights to pension benefits under more than

one pension plan of the same or different employers as long as each

plan and the assignment of benefit rights under each plan are clearly

specified.

[ERISA § 206(d)(3)(C)(iv); IRC § 414(p)(2)(D)]

1-11: Must all QDROs have the same provisions?

No. Although every QDRO must contain certain provisions, such as

the names and addresses of the participant and alternate payee(s) and

the name of the plan(s), the specific content of the rest of the QDRO

will depend, as explained in more detail in Chapter 3, on the type of

pension plan, the nature of the participant’s pension benefits, the

purposes behind issuing the order, and the intent of the drafting parties.

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1-12: Who determines whether an order is a QDRO?

Under Federal law, the administrator of the pension plan that provides the

benefits affected by an order is the individual (or entity) initially responsible

for determining whether a domestic relations order is a QDRO. Plan

administrators have specific responsibilities and duties with respect to

determining whether a domestic relations order is a QDRO. Plan

administrators, as plan fiduciaries, are required to discharge their duties

prudently and solely in the interest of plan participants and beneficiaries.

Among other things, plans must establish reasonable procedures to

determine the qualified status of domestic relations orders and to administer

distributions pursuant to qualified orders. Administrators are required to

follow the plan’s procedures for making QDRO determinations.

Administrators also are required to furnish notice to participants and

alternate payees of the receipt of a domestic relations order and to furnish

a copy of the plan’s procedures for determining the qualified status of

such orders. See Chapter 2 for a detailed discussion of the duties and

responsibilities of plan administrators in making QDRO determinations.

It is the view of the Department of Labor that a state court (or other state

agency or instrumentality with the authority to issue domestic relations

orders) does not have jurisdiction to determine whether an issued domestic

relations order constitutes a “qualified domestic relations order.” In the

view of the Department, jurisdiction to challenge a plan administrator’s

decision about the qualified status of an order lies exclusively in Federal

court.

[ERISA §§ 206(d)(3)(G)(i) and (ii), 404(a), 502(a)(3), 502(e), 514;

IRC § 414(p)(6)(A)(ii)]

1-13: Who is the Who is the “administrator administrator” of the plan?

The “administrator” of an employee benefit plan is the individual or entity

specifically designated in the plan documents as the administrator. If the

plan documents do not designate an administrator, the administrator is the

employer maintaining the plan, or, in the case of a plan maintained by

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more than one employer, the association, committee, joint board of trustees,

or similar group representing the parties maintaining the plan. The name,

address, and phone number of the plan administrator is required to be

included in the plan’s summary plan description. The summary plan

description is a document that the administrator is required to furnish to

each participant and to each beneficiary receiving benefits. It summarizes

the rights and benefits of participants and beneficiaries and the obligations

of the plan.

[ERISA §§ 3(16), 102(b), 29 CFR § 2520.102-3(f); IRC § 414(g),

Treas. Reg. § 1.414(g)-1]

1-14: Will the Department of Labor issue advisory opinions

on whether a domestic relations order is a QDRO?

No. A determination of whether an order is a QDRO necessarily requires

an interpretation of the specific provisions of the plan or plans to which the

order applies and the application of those provisions to specific facts,

including a determination of the participant’s actual pension benefits under

the plan(s). The Department will not issue opinions on such inherently

factual matters.

[See ERISA Procedure 76-1, 41 Fed. Reg. 36281 (1976)

(Appendix B)]

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This chapter describes the duties of a plan administrator in determining the qualified status

of domestic relations orders and administering distributions under QDROs. The following

areas are addressed:

What are the plan administrator’s responsibilities in furnishing information to a

participant and alternate payee?

What measures must a plan administrator take to protect the plan participant’s

benefits upon receipt of a domestic relations order?

What procedures must a plan administrator follow in determining whether a domestic

relations order is a QDRO?

ERISA imposes a number of responsibilities on the plan administrator relating to the handling

of domestic relations orders. As a plan fiduciary, the administrator is required to discharge

these responsibilities prudently and solely in the interest of the plan’s participants and

beneficiaries. It is the view of the Department that the prudent discharge of a fiduciary’s

responsibilities with respect to the handling of domestic relations orders, like other areas

of plan administration, requires plan administrators to take steps to avoid unnecessary and

excessive administrative burdens and costs to the plan. The Department believes that the

adoption of procedures and policies designed to facilitate, rather than impede, the timely

processing and perfection of domestic relations orders generally will serve to minimize

plan burdens and costs attendant to QDRO determinations.

The following questions and answers are intended to provide guidance on the discharge of

an administrator’s obligations under the QDRO and fiduciary responsibility provisions of

ERISA.

Chapter 2

Administration of QDROs: Determining

Qualified Status and Paying Benefits

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2-1: What information is an administrator required to

provide a prospective alternate payee before the

administrator receives a domestic relations order?

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

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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. See Question 2-5.

[ERISA §§ 206(d)(3)(A) - (C), 404(a); IRC § 414(p)(1) - (3)]

2-2: What are the duties of a plan administrator upon

receipt of a domestic relations order by the plan?

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. See Question 2-10.

[ERISA § 206(d)(3)(G)(i); IRC § 414(p)(6)(A)]

2-3: Is a plan required to have procedures for determining

whether a domestic relations order is qualified?

Yes. Every pension plan is required to establish written procedures for

determining whether domestic relations orders are QDROs and for

administering distributions under QDROs.

[ERISA § 206(d)(3)(G)(ii); IRC § 414(p)(6)(B)]

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2-4: What requirements must a plan’s QDRO procedures

meet?

The QDRO procedures must:

be in writing;

be reasonable;

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; and

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.

It is the view of the Department that a plan’s QDRO procedures would

not be considered “reasonable” if they unduly inhibited or hampered the

obtaining of a QDRO determination or the making of distributions under a

QDRO. For example, any procedure that conditioned making a QDRO

determination on the payment of a fee by a participant or alternate payee

(either directly or as a charge against the participant’s account) would not

be considered a “reasonable procedure.” See Question 2-6; Advisory

Opinion 94-32A (Appendix A).

[ERISA § 206(d)(3)(G)(ii); IRC § 414(p)(6)]

2-5: Are there Are there other matters that should be addressed in

a plan’s QDRO procedures?

Yes. 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

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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:

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 (see Questions 2-1, 2-7);

A description of any time limits set by the plan administrator for making

determinations;

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) (see Questions 2-12, 2-13); and

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.

[ERISA §§ 206(d)(3)(G), 206(d)(3)(H), 404(a); IRC §§ 414(p)(6),

414(p)(7)]

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 2-6: May a plan administrator charge a participant or May a plan administrator charge a participant or

alternate payee for determining the qualified status

of a domestic relations order?

The Department has taken the position that pension plans may not impose

a fee or charge on a participant or alternate payee (either directly or as a

charge against a plan account) in connection with a determination of the

status of a domestic relations order or the administration of a QDRO.

[ERISA §§ 206(d)(3), 404(a); see Advisory Opinion 94-32A

(Appendix A)]

 2-7: May plan administrators provide parties with a

model form or forms to assist in the preparation of model form or forms to assist in the preparation of

a QDRO?

Yes. 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.

2-8: In determining the qualified status of a domestic

relations order relations order, is the administrator required to

determine the validity of the order under state

domestic relations law?

No. 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

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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.

[See Advisory Opinion 99-13A (Appendix A); Advisory Opinion

92-17A (Appendix A)]

2-9: 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?

No. 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.

[ERISA §§ 206(d)(3)(C), 206(d)(3)(I); IRC § 414(p)(2);

see S. Rep. 575, 98th Cong., 2d Sess. at 20]

2-10: How long may the plan administrator take to determine

whether a domestic relations order is a QDRO?

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. See also Question 2-12.

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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. See Question 2-4.

[ERISA § 206(d)(3)(G)(i)(II); IRC § 414(p)(6)(A)(ii)]

2-11: 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?

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.

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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. See Questions 2-12

and 2-13, which discuss how benefits should be treated when

determinations on qualified status are made either before or after the

beginning of the “18-month period.”

[ERISA §§ 206(d)(3)(H), 404(a); IRC § 414(p)(7)]

 2-12: What are an administrator What are an administrator’s duties with respect to a

domestic relations order received by the plan before

the beginning of the the beginning of the “18-month period”?

As explained in Question 2-10, 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”

(see Question 2-11) 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

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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.

[ERISA §§ 206(d)(3)(H), 404(a)]

2-13: What are an administrator 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?

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. See Questions 2-11, 2-12. 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

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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.

See Question 2-12.

[ERISA §§ 206(d)(3)(H), 404(a); IRC § 414(p)(7); but see H.R.

Conf. Rep. No. 841, 99th Cong., 2d Sess. II-858 (describing 1986

amendments to the Retirement Equity Act of 1984, including clarification

of the procedures to be followed during the 18-month segregation period

for QDRO determinations)]

2-14: What kind of notice is required to be provided by a

plan administrator following a QDRO determination?

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

21

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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:

the reasons why the order is not a QDRO;

references to the plan provisions on which the plan administrator’s

determination is based;

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); and

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.

[ERISA §§ 206(d)(3)(G)(i)(II), 206(d)(3)(I); IRC § 414(p)(6)(A)(ii)]

2-15: What effect does an order that a plan administrator What effect does an order that a plan administrator

has determined to be a QDRO have on the

administration of the plan?

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.

[ERISA §§ 206(d)(3)(A), 206(d)(3)(E)(i)(III); IRC §§ 401(a)(13)(B),

414(p)(4)(A)(iii)]

22

"

"

"

"
2-16: What disclosure rights does an alternate payee have

under a QDRO?

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.

[ERISA §§ 104, 105, 206(d)(3)(J), 404(a); 29 CFR § 2520.104b-1

et seq.]

2-17: 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 into another plan, or is maintained by a successor

employer?

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.

[ERISA §§ 204(g), 206(d)(3)(A), 403(c)(1); IRC §§ 401(a)(13)(B),

411(d)(6); see Staff of the Joint Committee on Taxation, Explanation

of Technical Corrections to the Tax Reform Act of 1984 and Other

Recent Tax Legislation, 100th Cong., 1st Sess. (Comm. Print 1987)

at 224]

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2-18: What happens to the rights created by a QDRO if a

plan is terminated?

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.

[ERISA §§ 206(d)(3)(A), 403(d)]

2-19: 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?

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. See Question 3-4 for a discussion of these basic

types of pension 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. For instance, PBGC does

not pay certain death and supplemental benefits. In addition, benefit

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amounts and the forms of benefit PBGC pays are limited. PBGC has

special rules that apply these guarantee limitations to QDROs. See 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 19153, Washington, D.C. 20036-0153. 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 PBGC’s Customer Service Center at 1-800-400-

PBGC. The booklet is also available on PBGC’s Web site at

www.pbgc.gov

25
Chapter 3

Drafting QDROs

This chapter provides guidance for the process of drafting domestic relations orders that

qualify as QDROs. The following areas are addressed:

What are the most common and useful ways of dividing pension benefits?

What are survivor benefits, and why are they important?

When can an alternate payee receive the benefits assigned by a QDRO?

In what form will the alternate payee receive the assigned benefits?

Although domestic relations orders that involve pension plans are issued under and governed

by state law, Federal law (ERISA and the Code) and the terms of the relevant pension

plan determine whether these orders can be QDROs. This chapter discusses how to draft

orders that will qualify as QDROs while accomplishing the purposes for which the pension

benefits are being divided.

This chapter also discusses the most common methods of dividing pension benefits under

the two separate types of pension plans: defined benefit plans and defined contribution

plans. The following questions and answers emphasize the importance of understanding

the nature of a participant’s pension benefits and of making decisions about the assignment

of any survivor benefits payable under the pension plan.

27

!

!

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3-1: What is the best way to divide a participant’s pension

benefits in a QDRO?

There is no single “best” way to divide pension benefits in a QDRO.

What will be “best” in a specific case will depend on many factors, including

the type of pension plan, the nature of the participant’s pension benefits,

and why the parties are seeking to divide those benefits.

In deciding how to divide a participant’s pension benefits in a QDRO, it is

also important to consider two aspects of a participant’s pension benefits:

the benefit payable under the plan directly to the participant for retirement

purposes (referred to here as the “retirement benefit”), and any benefit

that is payable under the plan on behalf of the participant to someone else

after the participant dies (referred to here as the “survivor benefit”). These

two aspects of a participant’s pension benefits are discussed separately in

this booklet only in order to emphasize the importance of considering how

best to divide pension benefits.

The following four questions and answers introduce the basic concepts

that should inform decisions about drafting QDROs. Question 3-2 explains

the scope of assignment permitted by the QDRO provisions; Questions

3-3 and 3-4 relate primarily to the retirement benefit; Question 3-5 describes

survivor benefits. Later questions present more specific information about

how to draft QDROs.

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3-2: How much can be given to an alternate payee through

a QDRO?

A QDRO can give an alternate payee any part or all of the pension benefits

payable with respect to a participant under a pension plan. However, the

QDRO cannot require the plan to provide increased benefits (determined

on the basis of actuarial value); nor can a QDRO require a plan to provide

a type or form of benefit, or any option, not otherwise provided under the

plan (with one exception, described in Questions 3-9 and 3-10, for an

alternate payee’s right to receive payment at the participant’s “earliest

retirement age”). The QDRO also cannot require the payment of benefits

to an alternate payee that are required to be paid to another alternate

payee under another QDRO already recognized by the plan.

[ERISA §§ 206(d)(3)(B)(i)(I), 206(d)(3)(D), 206(d)(3)(E);

IRC §§ 414(p)(1)(A)(i), 414(p)(3), 414(p)(4); Advisory

Opinion 2000-09A (Appendix A)]

3-3: Why are the reasons for dividing the pension benefits

important?

Generally, QDROs are used either to provide support payments (temporary

or permanent) to the alternate payee (who may be the spouse, former

spouse or a child or other dependent of the participant) or to divide marital

property in the course of dissolving a marriage. These differing goals

often result in different choices in drafting a QDRO. This answer describes

two common different approaches in drafting QDROs for these two different

purposes.

One approach that is used in some orders is to “split” the actual benefit

payments made with respect to a participant under the plan to give the

alternate payee part of each payment. This approach to dividing retirement

benefits is often called the “shared payment” approach. Under this

approach, the alternate payee will not receive any payments unless the

29

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participant receives a payment or is already in pay status. This approach

is often used when a support order is being drafted after a participant has

already begun to receive a stream of payments from the plan (such as a

life annuity).

An order providing for shared payments, like any other QDRO, must

specify the amount or percentage of the participant’s benefit payments

that is assigned to the alternate payee (or the manner in which such amount

or percentage is to be determined). It must also specify the number of

payments or period to which it applies. This is particularly important in

the shared payment QDRO, which must specify when the alternate payee’s

right to share the payments begins and ends. For example, when a state

authority seeks to provide support to a child of a participant, an order

might require payments to the alternate payee to begin as soon as possible

after the order is determined to be a QDRO and to continue until the

alternate payee reaches maturity. Alternatively, when support is being

provided to a former spouse, the order might state that payments to the

alternate payee will end when the former spouse remarries. If payments

are to end upon the occurrence of an event, notice and reasonable

substantiation that the event has occurred must be provided for the plan to

be able to comply with the terms of the QDRO.

Orders that seek to divide a pension as part of the marital property upon

divorce or legal separation often take a different approach to dividing the

retirement benefit. These orders usually divide the participant’s retirement

benefit (rather than just the payments) into two separate portions with the

intent of giving the alternate payee a separate right to receive a portion of

the retirement benefit to be paid at a time and in a form different from that

chosen by the participant. This approach to dividing a retirement benefit

is often called the “separate interest” approach.

30
An order that provides for a separate interest for the alternate payee must

specify the amount or percentage of the participant’s retirement benefit to

be assigned to the alternate payee (or the manner in which such amount or

percentage is to be determined). The order must also specify the number

of payments or period to which it applies, and such orders often satisfy

this requirement simply by giving the alternate payee the right that the

participant would have had under the plan to elect the form of benefit

payment and the time at which the separate interest will be paid. Such an

order would satisfy the requirements to be a QDRO.

Federal law does not require the use of either approach for any specific

domestic relations purpose, and it is up to the drafters of any order to

determine how best to achieve the purposes for which pension benefits

are being divided. Further, the shared payment approach and the separate

interest approach can each be used for either defined benefit or defined

contribution plans. See Question 3-4 for a discussion of the two basic

types of pension plans. However, it is important in drafting any order to

understand and follow the terms of the plan. An order that would require

a plan to provide increased benefits (determined on an actuarial basis) or

to provide a type or form of benefit, or an option, not otherwise available

under the plan cannot be a QDRO. See Questions 3-4, 3-6, and 3-7 for

further information on dividing retirement benefits under defined benefit

and defined contribution plans.

In addition to determining whether or how to divide the retirement benefit,

it is important to consider whether or not to give the alternate payee a right

to survivor benefits or any other benefits payable under the plan. See

Question 3-5 for a discussion of survivor benefits.

[ERISA § 206(d)(3)(C)(ii) - (iv); IRC § 414(p)(2)(B) - (D)]

31
3-4: In deciding how to divide the participant’s pension

benefits, why is understanding the type of pension

plan important?

Understanding the type of pension plan is important because the order

cannot be a QDRO unless its assignment of rights or division of pension

benefits complies with the terms of the plan. Parties drafting a QDRO

should read the plan’s summary plan description and other plan documents

to understand what pension benefits are provided under the plan.

Pension plans may be divided generally into two types: defined benefit

plans and defined contribution plans.

A defined benefit plan promises to pay each participant a specific benefit

at retirement. This basic retirement benefit is usually based on a formula

that takes into account factors like the number of years a participant works

for the employer and the participant’s salary. The basic retirement benefit

is generally provided in the form of periodic payments for the participant’s

life beginning at what the plan calls “normal retirement age.” This stream

of periodic payments is generally known as an “annuity.” A participant’s

basic retirement benefit under a defined benefit plan may increase over

time, either before or after the participant begins receiving benefits, due to

a variety of circumstances, such as increases in salary or the crediting of

additional years of service with the employer (which are taken into account

under the plan’s benefit formula), or through amendment to the plan’s

provisions, including some amendments to provide cost of living

adjustments.

Defined benefit plans may promise to pay benefits at various times, under

certain circumstances, or in alternative forms. Benefits paid at those times

or in those forms may have a greater actuarial value than the basic

retirement benefit payable by the plan at the participant’s normal retirement

age. When one form of benefit has a greater actuarial value than another

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form, the difference in value is often called a “subsidy.” See Appendix C

at pages 94-95 for further discussion of the benefits provided under

defined benefit plans.

A defined contribution plan, by contrast, is a type of pension plan that

provides for an individual account for each participant. The participant’s

benefits are based solely on the amount contributed to the participant’s

account and any income, expenses, gains or losses, and any forfeitures of

accounts of other participants that may be allocated to such participant’s

account. Examples of defined contribution plans include profit-sharing

plans (like “401(k)” plans), employee stock ownership plans (“ESOPs”),

and money purchase plans. A participant’s basic retirement benefit in a

defined contribution plan is the amount in his or her account at any given

time. This is generally known as the participant’s “account balance.”

Defined contribution plans commonly provide for retirement benefits to

be paid in the form of a lump sum payment of the participant’s entire

account balance. Defined contribution plans by their nature do not offer

subsidies.

It should be noted, however, that some defined benefit plans provide for

lump sum payments, and some defined contribution plans provide for

annuities.

[IRS Notice 97-11, 1997-2 IRB 49 (Jan. 13, 1997) (Appendix C)]

3-5: What are What are “survivor benefits, survivor benefits,” and why should a QDRO

take them into account?

Federal law requires all pension plans, whether they are defined benefit

plans or defined contribution plans, to provide benefits in a way that includes

a survivor benefit for the participant’s spouse. The provisions creating

these protections are contained in section 205 of ERISA and sections

401(a)(11) and 417 of the Code. The type of survivor benefit that is

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required by Federal law depends on the type of pension plan. Plans also

may provide for survivor (or “death”) benefits that are in addition to those

required by Federal law. Participants and alternate payees drafting a

QDRO should read the plan’s summary plan description and other plan

documents to understand the survivor benefits available under the plan.

Federal law generally requires that defined benefit plans and certain defined

contribution plans pay retirement benefits to participants who were married

on the participant’s “annuity starting date” (this is the first day of the first

period for which an amount is payable to the participant) in a special form

called a “qualified joint and survivor annuity” (QJSA) unless the participant

elects a different form and the spouse consents to that election. When

benefits are paid as a QJSA, the participant receives a periodic payment

(usually monthly) during his or her life, and the surviving spouse of the

participant receives a periodic payment for the rest of the surviving spouse’s

life upon the participant’s death. See Appendix C at page 98 for a

description of the QJSA. Federal law also generally requires that, if a

married participant with a nonforfeitable benefit under one of these types

of plans dies before his or her “annuity starting date,” the plan must pay

the surviving spouse of the participant a monthly survivor benefit. This

benefit is called a “qualified preretirement survivor annuity” (QPSA).

Appendix C also describes the QPSA at page 99.

Those defined contribution plans that are not required to pay pension

benefits to married participants in the form of a QJSA or QPSA (like

most 401(k) plans) are required by Federal law to pay any balance

remaining in the participant’s account after the participant dies to the

participant’s surviving spouse. If the spouse gives written consent, the

participant can direct that upon the participant’s death any balance

remaining in the account will be paid to a beneficiary other than the spouse,

for example, the couple’s children. Under these defined contribution plans,

Federal law does not require a spouse’s consent to a participant’s decision

to withdraw any portion (or all) of his or her account balance during the

participant’s life.

34
If a participant and his or her spouse become divorced before the

participant’s annuity starting date, the divorced spouse loses all right to

the survivor benefit protections that Federal law requires be provided to a

participant’s spouse. If the divorced participant remarries, the participant’s

new spouse may acquire a right to the Federally mandated survivor benefits.

A QDRO, however, may change that result. To the extent that a QDRO

requires that a former spouse be treated as the participant’s surviving

spouse for all or any part of the survivor benefits payable after the death

of the participant, any subsequent spouse of the participant cannot be

treated as the participant’s surviving spouse. For example, if a QDRO

awards all of the survivor benefit rights to a former spouse, and the

participant remarries, the participant’s new spouse will not receive any

survivor benefit upon the participant’s death. If such a QDRO requires

that a defined benefit plan, or a defined contribution plan subject to the

QJSA and QPSA requirements, treat a former spouse of a participant as

the participant’s surviving spouse, the plan must pay the participant’s benefit

in the form of a QJSA or QPSA unless the former spouse who was named

as surviving spouse in the QDRO consents to the participant’s election of

a different form of payment.

It should also be noted that some pension plans provide that a spouse of

a participant will not be treated as married unless he or she has been

married to the participant for at least a year. If the pension plan to which

the QDRO relates contains such a one-year marriage requirement, then

the QDRO cannot treat the alternate payee as a surviving spouse if the

marriage lasted for less than one year.

In addition, it is important to note that some pension plans may provide

for survivor benefits in addition to those required by Federal law for the

benefit of the surviving spouse. Generally, however, the only way to

establish a former spouse’s right to survivor benefits such as a QJSA or

QPSA is through a QDRO. A QDRO may provide that a part or all of

such other survivor benefits shall be paid to an alternate payee rather than

35
to the person who would otherwise be entitled to receive such death benefits

under the plan. As discussed above (see, e.g., Question 3-3), a spouse

or former spouse can also receive a right to receive (as a separate interest

or as shared payments) part of the participant’s retirement benefit as well

as a survivor’s benefit.

[ERISA §§ 205, 206(d)(3)(F); IRC §§ 401(a)(11), 414(p)(5), 417;

Advisory Opinion 2000-09A (Appendix A)]

3-6: How may the participant’s retirement benefit be

divided if the pension plan is a defined contribution

plan?

An order dividing a retirement benefit under a defined contribution plan

may adopt either a “separate interest” approach or a “shared payment”

approach (or some combination of these approaches). See Question 3-3

for a discussion of these two approaches. Orders that provide the alternate

payee with a separate interest, either by assigning to the alternate payee a

percentage or a dollar amount of the account balance as of a certain date,

often also provide that the separate interest will be held in a separate

account under the plan with respect to which the alternate payee is entitled

to exercise the rights of a participant. Provided that the order does not

assign a right or option to an alternate payee that is not otherwise available

under the plan, an order that creates a separate account for the alternate

payee may qualify as a QDRO.

Orders that provide for shared payments from a defined contribution plan

should clearly establish the amount or percentage of the participant’s

payments that will be allocated to the alternate payee and the number of

payments or period of time during which the allocation to the alternate

payee is to be made. A QDRO can specify that any or all payments made

to the participant are to be shared between the participant and the alternate

payee.

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In drafting orders dividing benefits under defined contribution plans, parties

should also consider addressing the possibility of contingencies occurring

that may affect the account balance (and therefore the alternate payee’s

share) during the determination period. For example, parties might be

well advised to specify the source of the alternate payee’s share of a

participant’s account that is invested in multiple investments because there

may be different methods of determining how to derive the alternate payee’s

share that would affect the value of that share. The parties should also

consider how to allocate any income or losses attributable to the participant’s

account that may accrue during the determination period. If an order

allocates a specific dollar amount rather than a percentage to an alternate

payee as a shared payment, the order should address the possibility that

the participant’s account balance or individual payments might be less

than the specified dollar amount when actually paid out.

[ERISA §§ 206(d)(3)(C); IRC § 414(p)(2)]

3-7: How may the participant’s retirement benefit be

divided if the pension plan is a defined benefit plan?

As indicated earlier, an order may adopt either the shared payment or the

separate interest approach (or a combination of the two) in dividing pension

benefits in a defined benefit plan. See Question 3-3 for a discussion

of these two approaches.

If shared payments are desired, the order should specify the amount of

each shared payment allocated to the alternate payee either by percentage

or by dollar amount. If the order describes the alternate payee’s share as

a dollar amount, care should be taken to establish that the payments to the

participant will be sufficient to satisfy the allocation, and the order should

indicate what is to happen in the event a payment is insufficient to satisfy

the allocation. The order must also describe the number of payments or

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period of time during which the allocation to the alternate payee is to

be made. This is usually done by specifying a beginning date and an

ending date (or an event that will cause the allocation to begin and/

or end). If an order specifies a triggering event that may occur outside

the plan’s knowledge, notice of its occurrence must be given to the

plan before the plan is required to act in accordance with the order.

If the intent is that all payments made under the plan are to be shared

between the participant and the alternate payee, the order may so

specify.

As discussed in Appendix C at pages 94-95, a defined benefit plan

may provide for subsidies under certain circumstances and may also

provide increased benefits or additional benefits either earned through

additional service or provided by way of plan amendment. A QDRO

that uses the “shared payment” method to give the alternate payee a

percentage of each payment may be structured to take into account

any such future increases in the benefits paid to the participant. Such

a QDRO does not need to address the treatment of future subsidies

or other benefit increases, because the alternate payee will

automatically receive a share of any subsidy or other benefit increases

that are paid to the participant. If the parties do not wish to provide

for the sharing of such subsidies or increases, the order should so

specify.

If a separate interest is desired for the alternate payee, it is important that

the order be based on adequate information from the plan administrator

and the plan documents concerning the participant’s retirement benefit

and the rights, options, and features provided under the plan. See Question

2-1. In particular, the drafters of a QDRO should consider any subsidies

or future benefit increases that might be available with respect to the

participant’s retirement benefit. The order may specify whether, and to

what extent, an alternate payee is to receive such subsidies or future benefit

increases. See Appendix C at pages 94-95 for a discussion of

38
subsidies and possible future increases in a participant’s benefits in

a defined benefit plan.

[ERISA §§ 206(d)(3)(C), 206(d)(3)(D); IRC §§ 414(p)(2), 414(p)(3)]

3-8: May the QDRO specify the form in which the alternate

payee’s benefits will be paid?

A QDRO that provides for a separate interest may specify the form in

which the alternate payee’s benefits will be paid subject to the following

limitations: (1) the order may not provide the alternate payee with a type

or form of payment, or any option, not otherwise provided under the plan;

(2) the order may not provide any subsequent spouse of an alternate

payee with the survivor benefit rights that Federal law requires be provided

to spouses of participants under section 205 of ERISA (see Question 3-

5); and (3) (for any tax-qualified pension plan) the payment of the alternate

payee’s benefits must satisfy the requirements of section 401(a)(9) of the

Code respecting the timing and duration of payment of benefits. In

determining the form of payment for an alternate payee, an order may

substitute the alternate payee’s life for the life of the participant to the

extent that the form of payment is based on the duration of an individual’s

life. As discussed in Appendix C at pages 96-97, however, the timing

and forms of benefit available to an alternate payee under a tax-qualified

plan may be limited by section 401(a)(9) of the Code.

Alternatively, a QDRO may (subject to the limitations described above)

give the alternate payee the right that the participant would have had under

the plan to elect the form of benefit payment. For example, if a participant

would have the right to elect a life annuity, the alternate payee may exercise

that right and choose to have the assigned benefit paid over the alternate

payee’s life. However, the QDRO must permit the plan to determine

Q

39
the amount payable to the alternate payee under any form of payment

in a manner that does not require the plan to pay increased benefits

(determined on an actuarial basis).

A plan may by its own terms provide alternate payees with additional

types or forms of benefit, or options, not otherwise provided to participants,

such as a lump-sum payment option, but the plan cannot prevent a QDRO

from assigning to an alternate payee any type or form of benefit, or option,

provided generally under the plan to the participant.

[ERISA §§ 206(d)(3)(A), 206(d)(3)(D), 206(d)(3)(E)(i)(III);

IRC §§ 401(a)(9), 401(a)(13)(B), 414(p)(3), 414(p)(4)(A)(iii)]

3-9: When can the alternate payee get the benefits assigned

under a QDRO?

A QDRO that provides for shared payments must specify the date on

which the alternate payee will begin to share the participant’s payments.

Such a date, however, cannot be earlier than the date on which the plan

receives the order. With respect to a separate interest, an order may

either specify the time (after the order is received by the plan) at which the

alternate payee will receive the separate interest or assign to the alternate

payee the same right the participant would have had under the plan with

regard to the timing of payment. In either case, a QDRO cannot provide

that an alternate payee will receive a benefit earlier than the date on which

the participant reaches his or her “earliest retirement age,” unless the plan

permits payments at an earlier date. Question 3-10 describes how to

determine this “earliest retirement age,” which is often a date earlier than

the earliest date on which the participant would be entitled to receive his

or her retirement benefit.

Q

40
The plan itself may contain provisions permitting alternate payees to

receive separate interests awarded under a QDRO at an earlier time

or under different circumstances than the participant could receive

the benefit. For example, a plan may provide that alternate payees

may elect to receive a lump sum payment of a separate interest at

any time. As discussed in Question 3-8 and in Appendix C at pages

96-97, section 401(a)(9) of the Code may affect when benefits must

be paid under tax-qualified pension plans.

[ERISA §§ 206(d)(3)(C), 206(d)(3)(D), 206(d)(3)(E); IRC §§ 401(a)(9),

414(p)(2), 414(p)(3), 414(p)(4)]

3-10: What is What is “earliest retirement age, earliest retirement age,” and why is it and why is it

important?

For QDROs, Federal law provides a very specific definition of “earliest

retirement age,” which is the earliest date as of which a QDRO can order

payment to an alternate payee (unless the plan permits payments at an

earlier date). The “earliest retirement age” applicable to a QDRO depends

on the terms of the pension plan and the participant’s age. “Earliest

retirement age” is the earlier of two dates:

the date on which the participant is entitled to receive a distribution

under the plan, or

the later of either

the date the participant reaches age 50, or

the earliest date on which the participant could begin receiving

benefits under the plan if the participant separated from service

with the employer.

Q

41

"

"

#

#
Drafters of QDROs should consult the plan administrator and the plan

documents for information on the plan’s “earliest retirement age.” The

following examples illustrate the concept of “earliest retirement age.”

Example 1. The pension plan is a defined contribution plan that permits

a participant to make withdrawals only when he or she reaches age 591⁄2

or terminates from service. The “earliest retirement age” for a QDRO

under this plan is: the earlier of (1) when the participant actually terminates

employment or reaches age 591⁄2, or (2) the later of the date the participant

reaches age 50 or the date the participant could receive the account balance

if the participant terminated employment. Since the participant could

terminate employment at any time and thereby be able to receive the

account balance under the plan’s terms, the later of the two dates described

in (2) above is “age 50.” The “earliest retirement age” formula for this

plan can be simplified to read: the earlier of (1) actually reaching age 591⁄2

or terminating employment or (2) age 50. Since age 50 is earlier than age

591⁄2, the “earliest retirement age” for this plan will be the earlier of age 50

or the date the participant actually terminates from service.

Example 2. The pension plan is a defined benefit plan that permits

retirement benefits to be paid beginning when the participant reaches age

65 and terminates employment. It does not permit earlier payments. The

“earliest retirement age” for this plan is: the earlier of (1) the date on

which the participant actually reaches age 65 and terminates employment,

or (2) the later of age 50 or the date on which the participant reaches age

65 (whether he or she terminates employment or not). Because age 65 is

later than age 50, the second part of the formula can be simplified to read

“age 65” so that the formula reads as follows: the “earliest retirement age”

is the earlier of (1) the date on which the participant reaches age 65 and

actually terminates or (2) the date the participant reaches age 65. Under

this plan, therefore, the “earliest retirement age” will be the date on which

the participant reaches age 65.

[ERISA § 206(d)(3)(E); IRC § 414(p)(4)]

42
43

Appendix A

Department of Labor

Advisory Opinion Letters
Appendix A 45

AO 90-46A

Dec. 4, 1990

Ms. Ellen O. Pfaff

Lane Powell Moss & Miller

3800 Rainier Bank Tower

Seattle, Washington 97101-2647

Dear Ms. Pfaff:

This responds to your request for an advisory opinion, on behalf of the

trustee of the Bruce A. Nordstrom Self-Employed Retirement Plan (Plan),

concerning the application of sections 514 and 206(d) of the Employee

Retirement Income Security Act of 1974 (ERISA) with respect to the

court order described below.1 Your submission contains the following

facts and representations.

The Plan is a tax-qualified retirement plan2 under which benefits are

payable upon the participant’s retirement or death. The Plan provides

that benefits may not be assigned or alienated except in the case of a

“qualified domestic relations order.” Bruce A. Nordstrom is a Plan

participant whose benefit account is not in pay status.

Bruce Nordstrom’s wife, Frances W. Nordstrom, died October 5, 1984.

Her will was admitted to probate in the Superior Court for the State of

Washington at King County (the Court). Subsequently, the estate of

Frances Nordstrom (the Estate) filed a petition asking the Court to

require the Plan to divide and segregate that portion of Bruce Nordstrom’s

benefits which represents the interest of the Estate. You indicate the

request was made on the grounds that, inter alia, Frances Nordstrom

owned at her death an undivided one-half community interest in Bruce

Nordstrom’s accrued benefits pursuant to the community property law of

the State of Washington and that a court order for such division and

segregation of benefits could issue in accordance with section 206(d)(3)

of ERISA. The court granted the petition and entered an order styled

“Qualified Domestic Relations Order and Order Dividing Retirement

Benefits” (the Court Order).

You request the views of the Department of Labor concerning whether the

community property law of the State of Washington is preempted by

section 514 of ERISA and whether the Court Order falls within the scope

of section 206(d)(3) of ERISA. Section 514(a) of ERISA generally

preempts all state laws insofar as they relate to employee benefit

plans covered by title I of ERISA. Therefore, a state community

1For convenience, this letter refers to the provisions of section 206(d) of ERISA rather

than to the corresponding provisions in sections 401(a)(13)(B) and 414(p) of the Internal

Revenue Code, to which your request refers.

2You indicated in a telephone conversation with a representative of this Office that the

plan has a number of participants and is covered by title I of ERISA.
46 Appendix A

property law that considers the pension earned by a married spouse to

be community property is preempted under this provision, unless some

exception applies.

Section 514(b) of ERISA specifies certain exceptions from the broad

preemptive effect of section 514(a). Of those exceptions, only that

provided by section 514(b)(7) has relevance to community property laws.

Section 514(b)(7) states that preemption under section 514(a) does not

apply to “qualified domestic relations orders” within the meaning of

ERISA section 206(d)(3)(B)(i).

Section 206(d)(1) of ERISA generally requires pension plans covered by

title I of ERISA to provide that plan benefits may not be assigned or

alienated. Section 206(d)(3)(A) of ERISA states that section 206(d)(1)

applies to an assignment or alienation of benefits pursuant to a

“domestic relations order,” unless the order is determined to be a

“qualified domestic relations order” (QDRO). Section 206(d)(3)(A)

further provides that pension plans must provide for payment of benefits

in accordance with the applicable requirements of any QDRO.

Section 206(d)(3)(B) of ERISA defines the terms “qualified domestic

relations order” and “domestic relations order” for purposes of section

206(d)(3) as follows:

(B) For purposes of [section 206(d)(3)] —

(i) the term “qualified domestic relations order” means a

domestic relation order—

(I) which creates or recognizes the existence of an

alternate payee’s right to, or assigns to an

alternate payee the right to, receive all or a

portion of the benefits payable with respect to a

participant under a plan, and

(II) with respect to which the requirements of

subparagraphs (C) and (D) are met, and

(ii) the term “domestic relations order” means any

judgment, decree, or order (including approval of a

property settlement agreement) which —

(I) relates to the provision of child support,

alimony payments, or marital property rights to a

spouse, former spouse, child, or other dependent of a

participant, and

(II) is made pursuant to a State domestic relations

law (including a community property law). (emphasis

added)

-2-
Appendix A 47

The term “alternate payee” is defined by ERISA section 206(d)(3)(K) to

mean “any spouse, former spouse, child, or other dependent of a participant

who is recognized by a domestic relations order as having a right to

receive all, or a portion of, the benefits payable under a plan with

respect to such participant.”

Sections 514(b)(7) and 206(d)(3) of ERISA were enacted as part of the

Retirement Equity Act of 1984 (REA), which aimed primarily at assuring

greater and more equitable opportunity for women working as employees

or homemakers to receive private pension income. The legislative

history of the QDRO provisions of REA contains numerous statements

indicating that Congress was focusing on the division of pension

benefits in marital dissolution or dependent support situations. For

example, Congressman William Clay described the QDRO provisions during

a House floor debate on the legislation as follows:

Finally, women may be denied their right to pension

benefits by the dissolution of a marriage by divorce,

regardless of how many years she served as an economic

partner to a man covered by a pension plan. Even in cases in

which the State domestic relations court is willing to

consider the pension an asset of the marriage and award the

ex-wife a share of it, her rights have been thwarted. Pension

plans have refused to honor those court orders claiming that

they required an impermissible assignment of benefits and

were preempted by ERISA.

H.R. 4280 makes it clear that honoring a legitimate

State court order awarding an ex-spouse some or all of a

worker’s pension does not violate the antiassignment clause

of ERISA. In addition, the legislation creates an exception

from ERISA’s broad preemption of State laws for qualified

domestic relations orders.3

Moreover, the report of the Senate Committee on Finance made specific

mention of state community property laws in observing that “[s]everal

cases have arisen in which courts have been required to determine

whether the ERISA preemption and spendthrift provisions apply to family

support obligations (e.g. alimony, separate maintenance, and child

support obligations).4 The report noted “[t]here is a divergence of

-3-

3

130 Cong. Rec. 13327 (1984).

4

S. Rep. No. 575, 98th Cong., 2d Sess. 18 (1984).
48 Appendix A

opinion among the courts as to whether ERISA preempts State community

property laws insofar as they relate to the rights of a married couple

to benefits under a pension, etc., plan,” 5 and cited two cases in which

application of state community property law to pension benefits was at

issue in the context of marital dissolution proceedings.6

It thus appears Congress generally intended that the QDRO provisions of

ERISA would have application in those court proceedings conducted

primarily to resolve domestic relations issues. With respect to ERISA

section 206(d)(3)(B)(ii)(II), it is the view of the Department of Labor

that Congress intended the QDRO provisions to encompass state community

property laws only insofar as such laws would ordinarily be recognized

by courts in determining alimony, property settlement and similar

orders issued in domestic relations proceedings. We find no indication

Congress contemplated that the QDRO provisions would serve as a mechanism

in which a non-participant spouse’s interest derived only from state

property law could be enforced against a pension plan.

In the case at hand, the Court Order was issued in a probate proceeding

and would recognize an interest in pension benefits of the surviving

spouse solely on the basis of the state community property law. Consistent

with the views discussed above, it is the opinion of the Department of

Labor that the Court Order is not a “domestic relations order” within

the meaning of section 206(d)(3)(B)(ii) of ERISA and, therefore, does

not constitute a QDRO for purposes of sections 206(d)(3) and 514(b)(7)

of ERISA. Accordingly, it is the opinion of the Department of Labor

that the Court Order is unenforceable against the Plan.

This letter constitutes an advisory opinion under ERISA Procedure 76-1.

Section 10 of the procedure explains the effect of advisory opinions.

Sincerely,

Robert J. Doyle

Director of Regulations

 and Interpretations

5Id. 19.

6The cases cited were Stone v. Stone, 632 F. 2d 740 (9th Cir. 1980) and Francis v. United

Technology Corp.,458 F. Supp. 84 (N.D. Cal. 1978).

-4-
Appendix A 49

 AO 92-17A

Sec. 206(d)(3)

Aug. 21, 1992

Ms. Anne E. Neydon

Sachs, Kadushin, O’Hare

 Helveston & Waldman, P.C.

1000 Farmer

Detroit, Michigan 48226

Dear Ms. Neydon:

The Internal Revenue Service has referred to us your request for

an advisory opinion on behalf of the Cement Masons’ Pension Trust Fund

(the Plan) concerning the application of the “qualified domestic relations

order” (QDRO) exception to the anti-assignment and alienation rules

contained in section 206(d)(3) of Title I of the Employee Retirement

Income Security Act of 1974 (ERISA), and sections 401(a)(13)(B) and

414(p) of the Internal Revenue Code of 1986 (the Code), to an order

from the Circuit Court for the County of Wayne, Michigan. Your

submission contains the following facts and representations.

The Plan is qualified under section 401(a) of the Code. The Plan

has received a proposed Qualified Domestic Relations Order (the Order)

in connection with a domestic relations proceeding in the Circuit Court

for the County of Wayne in the State of Michigan. The Order states that

X is a Plan participant whose benefit account is not in pay status. As

a result of such proceeding, a property division was entered into

between X and Y. The property division was executed prior to, and is

referenced in, the Order.

According to the terms of the Order, which you enclosed with your

letter, the Court approved the property division prior to granting an

annulment ab initio of the marriage between the parties. You represent

that, at the time of the property division and before the annulment,

the parties had been married for 38 years and the marriage had produced

six children. Under the Order, and pursuant to the terms of the

property division, Y is designated as the “alternate payee” assigned

50% of the participant’s accrued benefit as of the date of the Order.

The Order further designates Y as the surviving spouse of X. You

indicate that Michigan domestic relations law provides for the division

of property and the entry of such an order upon the annulment of a

marriage. 1

1Section 552.19 of the Michigan statute states that “upon the annulment of a marriage,

a divorce from the bonds of matrimony or a judgment of separate maintenance, the court

may make a further judgment for restoring to either party the whole, or such parts as it

shall deem just and reasonable, of the real and personal estate that shall have come to

either party by reason of the marriage, or for awarding to either party the value

thereof, to be paid by either party in money.” (MCLA 552.19)
50 Appendix A

You request an opinion as to whether a state court correctly ruled

that a party to an annulled marriage (1) is a “former spouse” of a

participant for purposes of the definition of “alternate payee” in

section 206(d)(3)(K) of ERISA, and (2) is designated as a “surviving

spouse” pursuant to section 206(d)(3)(F) of ERISA for purposes of the

joint and survivor and pre-retirement annuity provisions. In essence,

you are requesting an opinion on whether the plan administrator is

required to review such rulings as part of the process of determining

whether a domestic relations order is qualified under section 206(d)(3)

of ERISA.

Under the Retirement Equity Act of 1984, as amended (REA), the

Secretary of Labor has authority to issue regulations interpreting the

QDRO provisions in section 206(d)(3) of ERISA, as well as the parallel

provisions in sections 401(a)(13)(B) and 414(p) of the Code. To date,

the Department has not issued regulations interpreting these provisions.

Because your inquiry presents issues on which the answer seems to be

clear from the application of these statutory provisions to the facts

described, the Department has determined, in accordance with section

5.03 of ERISA Procedure 76-1, 41 Fed. Reg. 36281 (Aug. 27, 1976), that

it is appropriate to issue an advisory opinion in this case. For

convenience, references to Code sections that parallel provisions of

Title I of ERISA are omitted from the following discussion, but may be

assumed to be incorporated by reference when the parallel section in

Title I of ERISA is cited.

Section 206(d)(1) of ERISA generally requires pension plans covered

by Title I to provide that plan benefits may not be assigned or

alienated. Section 206(d)(3)(A) of ERISA states that section 206(d)(1)

applies to an assignment or alienation of benefits pursuant to a

“domestic relations order,” unless the order is determined to be a

QDRO. Section 206(d)(3)(A) further provides that pension plans must

provide for payment of benefits in accordance with the applicable

requirements of any QDRO.

Section 206(d)(3)(B) of ERISA defines the terms “qualified domestic

relations order” and “domestic relations order” as follows:

(B) For purposes of [section 206(d)(3)] —

(i) the term “qualified domestic relations order” means a

domestic relations order —

(I) which creates or recognizes the existence of an alternate

payee’s right to, or assigns to an alternate payee the right

to, receive all or a portion of the benefits payable with

respect to a participant under the plan, and

(II) with respect to which the requirements of subparagraphs

(C) and (D) are met, and

-2-
Appendix A 51

(ii) the term “domestic relations order” means any judgement,

decree, or order (including approval of a property settlement

agreement) which —

( I ) relates to the provision of child support, alimony

payments, or marital property rights to a spouse, former

spouse, child, or other dependent of a participant,and

( I I ) is made pursuant to a state domestic relations order.

Section 206(d)(3)(C) requires that in order for a domestic relations

order to be qualified such order must clearly specify (i) the name and

the last known mailing address (if any) of the participant and the name

and mailing address of each alternate payee covered by the order; (ii)

the amount or percentage of the participant’s benefits to be paid by

the plan to each such alternate payee, or the manner in which such

amount or percentage is to be determined; (iii) the number of payments

or period to which such order applies; and (iv) each plan to which the

order applies.

Section 206(d)(3)(D) specifies that a domestic relations order is

qualified only if such order does not require (i) the plan to provide

any type of benefit, or any option, not otherwise provided by the plan;

(ii) the plan to provide increased benefits (determined on the basis of

actuarial value); and (iii) the payment of benefits to an alternate

payee which are required to be paid to another alternate payee under

another order previously determined to be a qualified domestic relations

order.

The term “alternate payee” is defined by section 206(d)(3)(K) to

mean “any spouse, former spouse, child, or other dependent of a participant

who is recognized by a domestic relations order as having a right to

receive all, or a portion of, the benefits payable under a plan with

respect to such participant.”

Sections 206(d)(3)(F) of ERISA provides, with respect to the

joint and survivor and pre-retirement annuity provisions, that, to the

extent provided in any qualified domestic relations order:

( i ) the former spouse of a participant shall be treated as

a surviving spouse of such participant for purposes of section

205 (and any spouse of the participant shall not be treated as

a spouse of the participant for such purposes), and

( i i ) if married for at least 1 year, the surviving spouse

shall be treated as meeting the requirements of section 205(f).

Section 206(d)(3)(G) of ERISA requires the plan administrator to

-3-
52 Appendix A

determine the qualified status of domestic relations orders received by

the plan, and to administer distributions under such qualified orders,

pursuant to reasonable procedures established by the plan. Upon receipt

of the order, the plan administrator must promptly notify the participant

and each alternate payee named in the order of its receipt by the plan

and of the plan’s procedures for determining the order’s qualified

status.

Based on the foregoing, when a pension plan receives an order

requiring that all or a part of the benefits payable with respect to a

participant be distributed to an alternate payee, the plan administrator

must determine that the judgment, decree or order is a “domestic

relations order” within the meaning of section 206(d)(3)(B)(ii) of

ERISA — i.e., that it relates to the provision of child support,

alimony payments, or marital property rights to a spouse, former

spouse, child or other dependent of the participant, and that it is

made pursuant to a State domestic relations law by a State authority

with jurisdiction over such matters. Additionally, the plan administrator

must determine that the order is qualified under the requirements of

section 206(d)(3)(B)(i) of ERISA. It is the view of the Department

that the plan administrator is not required by section 206(d)(3) or any

other provision of Title I to review the correctness of a determination

by a competent State authority that an individual is a “spouse,”

“former spouse,” “child,” “other dependent” or “surviving spouse” of

the participant under state domestic relations law.2

With respect to your submission, you have represented that the

Order assigns to former spouse Y, as “alternate payee” 50% of participant

X’s accrued benefit under the Plan, and designates Y as the “surviving

spouse” of X. Further, you indicate that Michigan domestic relations

law provides for such a division of property upon the annulment of a

marriage. Accordingly, it is the view of the Department that, to the

extent the Order was executed by a court of competent jurisdiction

pursuant to Michigan domestic relations law, neither the determination

under the Order that Y is a “former spouse,” and thus meets the

requirements to be an “alternate payee” for purposes of section

206(d)(3)(B) of ERISA, nor the determination that Y is a “surviving

spouse” for purposes of section 206(d)(3)(F) of ERISA, are required to

be reviewed by the plan administrator. The Department expresses no

view regarding the qualified status of the domestic relations order in

this case.3

-4-

2While the question of whether an order is a qualified domestic relations order under

206(d)(3) of ERISA is a Federal question, determinations regarding an individual’s

status as a “spouse,” former spouse,” “child,” “other dependent” or “surviving spouse”

for purposes of a QDRO are questions of state law.

3As indicated in sections 5.01 and 5.04 of ERISA Procedure 76-1, the Department ordinarily

will not issue opinions on matters which are inherently factual in nature, or on the form
Appendix A 53

This letter constitutes an advisory opinion under ERISA Procedure

76-1. Accordingly, it is issued subject to the provisions of the

procedure, including section 10 thereof relating to the effect of advisory

opinions.

Sincerely,

Robert J. Doyle

Director of Regulations

 and Interpretations

-5-

or effect in operation of particular plan provisions. Accordingly, the Department will

not issue advisory opinions as to whether any particular domestic relations order

constitutes a QDRO, or whether a specific plan procedure for determining the qualified

status of domestic relations order satisfies the requirements of ERISA section

206(d)(3)(G)(ii).
54 Appendix A

August 4, 1994

AO 94-32A

Mr. Homer L. Elliott ERISA SECTION

Drinker Biddle & Reath 4 0 4 ( a)(1),

Philadelphia National Bank Building 206(d)(3)

Broad and Chestnut Streets

Philadelphia, PA 19107

Dear Mr. Elliott:

 This responds to your request for an advisory opinion on behalf

of the VIZ Manufacturing Company (the Company) regarding its Savings

and Investment Profit-Sharing Plan (the Plan). Your request concerns

the application of the “qualified domestic relations order” (QDRO)

exception to the anti-assignment and alienation rules contained in

section 206(d)(3) of Title I of the Employee Retirement Income

Security Act of 1974 (ERISA) and sections 401(a)(13)(B) and 414(p) of

the Internal Revenue Code of 1986 (the Code).1

 At issue is a

proposed amendment to the Plan that would allow the costs of

determining and administering a QDRO to be charged against the

account of the participant affected by the QDRO. Your submission

contains the following facts and representations.

 The Plan is maintained to provide retirement benefits to

eligible employees. Consistent with the Plan documents, alienation

of benefits payable under the Plan is prohibited except in the case

of a QDRO or any domestic relations order entered before January 1,

1985.

 The Plan has received and continues to receive domestic

relations orders that purport to be QDROs. In each instance the Plan

Administrator must comply with certain notice and procedural

requirements in determining whether the domestic relations order is a

QDRO. You represent that it is not unusual for a domestic relations

order to go through several modifications before it meets the

requirements necessary to be a QDRO and each time the Plan

Administrator may need to seek the advice of an attorney concerning

whether or not the order is a QDRO.

 Section 14.4 of the Plan provides that Plan expenses shall be

paid solely out of the trust established with respect to the Plan.

You represent that the expenses incurred in the determination and

administration of any particular domestic relations order affect the

earnings available to be allocated to the accounts of all plan

participants. Further, you state that since the determination and

1

References to the Internal Revenue Code sections that parallel these provisions of

Title I of ERISA are omitted from the following, but may be assumed to be incorporated

by reference when the parallel section of Title I is cited.
Appendix A 55

-2-

administration of any particular domestic relations order does not

affect all participants and beneficiaries, but only the participant

(and any alternate payee(s)) subject to the domestic relations order,

the Company desires to amend the Plan to provide that the costs

associated with determining the qualified status of a domestic

relations order and with administering distributions under a QDRO be

charged against the account of the participant affected.

 Section 206(d)(1) of ERISA generally requires pension plans

covered by Title I to provide that plan benefits may not be assigned

or alienated. Section 206(d)(3)(A) of ERISA states that section

206(d)(1) applies to an assignment or alienation of benefits pursuant

to a “domestic relations order,” unless the order is determined to

be a QDRO. Section 206(d)(3)(A) further provides that pension plans

must provide for payment of benefits in accordance with the

applicable requirements of any QDRO.

 Section 206(d)(3)(B) of ERISA defines the terms “qualified

domestic relations order” and “domestic relations order” as follows:

(B) For purposes of [section 206(d)(3)]--

(i) the term “qualified domestic relations order” means a

domestic relations order--

(I) which creates or recognizes the existence of an

alternate payee’s right to, or assigns to an alternate

payee the right to, receive all or a portion of the

benefits payable with respect to a participant under the

plan, and

(II) with respect to which the requirements of

subparagraphs (C) and (D) are met, and

(ii) the term “domestic relations order” means any judgement,

decree, or order (including approval of a property settlement

agreement) which--

(I) relates to the provision of child support, alimony

payments, or marital property rights to a spouse, former

spouse, child, or other dependent of a participant, and

(II) is made pursuant to a state domestic relations law

(including a community property law).

 Section 206(d)(3)(C) requires that in order for a domestic

relations order to be qualified such order must clearly specify (i)

the name and the last known mailing address (if any) of the

participant and the name and mailing address of each alternate payee

covered by the order; (ii) the amount or percentage of the

participant’s benefits to be paid by the plan to each such alternate
Appendix A

2The Department distinguishes such statutorily-granted rights of participants and

beneficiaries from rights that a plan may, but is not required to, provide under Title I

of ERISA. Thus, for example, under ERISA sections 404(c) and 408(b)(1), and the

Department’s implementing regulations, reasonable expenses associated with a

participant’s exercise of an option under the plan to direct investments or to take a

participant loan may be separately charged to the account of the individual participant,

provided such charges are consistent with Titles I and IV of ERISA and in accordance

with the documents and instruments governing the plan.

56

-3-

payee, or the manner in which such amount or percentage is to be

determined; (iii) the number of payments or period to which such

order applies; and (iv) each plan to which the order applies.

 Section 206(d)(3)(D) specifies that a domestic relations order

is qualified only if such order does not require (i) the plan to

provide any type of benefit, or any option, not otherwise provided by

the plan; (ii) the plan to provide increased benefits (determined on

the basis of actuarial value); and (iii) the payment of benefits to

an alternate payee which are required to be paid to another alternate

payee under another order previously determined to be a qualified

domestic relations order.

 Section 206(d)(3)(G) of ERISA requires the plan administrator to

determine the qualified status of domestic relations orders received

by the plan, and to administer distributions under such qualified

orders, pursuant to reasonable procedures established by the plan.

Upon receipt of the order, the plan administrator must promptly

notify the participant and each alternate payee named in the order of

its receipt by the plan and of the plan’s procedures for determining

the order’s qualified status.

 Section 206(d)(3)(I) of ERISA specifies, among other things,

that if a plan fiduciary acts in accordance with part 4 of Title I of

ERISA in the administration of a domestic relations order, including

the determination of whether to treat a domestic relations order as

being (or not being) a qualified domestic relations order, then the

plan’s obligation to the participant and each alternate payee shall

be discharged to the extent of any payment made pursuant to ERISA.

Section 206(d)(3)(J) of ERISA provides that a person who is an

alternate payee under a QDRO shall be considered a beneficiary under

the plan.

 As appears from the foregoing, section 206(d)(3) of ERISA

expressly grants an alternate payee the right to receive pension plan

benefits payable under a QDRO. In general, it is the view of the

Department that a plan may not encumber the exercise of a right

mandated by Title I of ERISA by imposing conditions on the exercise

of the right that are not contemplated by the statute.2

 We note, in

this regard, that nothing in Title I of ERISA requires or permits a

plan to impose any separate fees or costs (apart from the appropriate

allocation of reasonable administrative expenses of the plan as a
Appendix A 57

-4-

whole) in connection with a determination of the status of a domestic

relations order or the administration of a QDRO.3

Accordingly, it is the view of the Department that imposing a

separate fee or cost on a participant or alternate payee (either

directly or as a charge against a plan account) in connection with a

determination of the status of a domestic relations order or

administration of a QDRO would constitute an impermissible

encumbrance on the exercise of the right of an alternate payee, under

Title I of ERISA, to receive benefits under a QDRO. Additionally, in

the Department’s view, because Title I of ERISA imposes specific

statutory duties on plan administrators regarding QDRO determinations

and the administration of QDROs, reasonable administrative expenses

thus incurred by the plan may not appropriately be allocated to the

individual participants and beneficiaries affected by the QDRO.4

 This letter constitutes an advisory opinion under ERISA

Procedure 76-1. Accordingly, it is issued subject to the provisions

of the procedure, including section 10 thereof relating to the effect

of advisory opinions.

Sincerely,

Robert J. Doyle

Director of Regulations

 and Interpretations

3

By contrast, Title I of ERISA expressly permits plans to impose separate

administrative costs in a variety of cases. For example, section 104(b)(4) of ERISA

states that the plan administrator may impose a reasonable charge to cover the cost of

furnishing copies of plan documents or instruments upon request of a participant or

beneficiary. See also, section 602 of ERISA, which permits a group health plan,

subject to certain conditions, to require the payment of 102% of the applicable premium

for any period of continuation coverage elected by an eligible participant or

beneficiary.

4

Of course, in administering QDROs, plan administrators must follow reasonable

procedures, as required under section 206(d)(3)(G), and must assure that the plan pays

only reasonable expenses of administering the plan, as required by sections 403(c)(1)

and 404(a)(1)(A) of ERISA. In this regard, it is the view of the Department that plan

fiduciaries must take appropriate steps to ensure that plan procedures are designed to

be cost effective and to minimize expenses associated with the administration of

domestic relations orders.
September 29, 1999

Brian G. Belisle 99-13A

Oppenheimer Wolff & Donnelly LLP ERISA SEC.

Plaza VII 206(d)(3)

45 South Seventh Street

Suite 3400

Minneapolis, MN 55402-1609

Dear Mr. Belisle:

This is in response to your request on behalf of the UAL

Corporation (UAL) and United Air Lines, Inc. (United) for an

advisory opinion. Specifically, you ask how a plan administrator

should treat domestic relations orders the plan administrator has

reason to believe are “sham” or “questionable” in nature.

UAL is a holding company. Its major wholly-owned subsidiary

is United. You represent that employees of United participate in

three pension plans — an employee stock ownership plan (the ESOP);

a 401(k) plan that is a profit sharing plan qualified under

section 401(a) of the Code (the 401(k) Plan); and a defined

benefit pension plan. The ESOP is a combination leveraged ESOP and

non-leveraged stock bonus plan that is qualified under section

401(a) of the Code. Substantially all of the assets in the ESOP

are invested in UAL stock.

You represent that the named plan administrator of the ESOP

is UAL. UAL has assigned many of its administrative duties under

the ESOP, including the duty to establish procedures for

determining whether a domestic relations order constitutes a

“qualified domestic relations order” (QDRO), to an ESOP Committee

consisting of employees of United. The ESOP Committee has

delegated to United’s Pension Programs Department (Pension

Programs) the responsibility of reviewing and determining whether

a domestic relations order received by the ESOP Committee is a

QDRO within the meaning of section 206(d)(3) of ERISA. Appeals of

QDRO determinations are made to the ESOP Committee.

You further represent that the ESOP permits an alternate

payee to request the immediate lump sum distribution of any

benefits under the plan that are assigned pursuant to the terms of

any domestic relations order that the ESOP Committee determines is

a QDRO. The ESOP otherwise permits lump sum distributions only

following a participant’s termination of employment (including by

way of the participant’s death).

1

1You do not ask and we do not opine as to whether any of the individual domestic

relations orders at issue is “qualified” pursuant to section 206(d)(3) of the Employee

Retirement Income Security Act of 1974, as amended (ERISA) and section 414(p) of the

Internal Revenue Code (Code).

58 Appendix A
The named plan administrator of the 401(k) Plan is United. United has

delegated the authority to control and manage the administration of the 401(k)

Plan, including the duty to establish procedures for determining whether a

domestic relations order constitutes a QDRO, to a Pension and Welfare Plans

Administration Committee (PAWPAC) consisting of employees of United. PAWPAC in

turn has delegated to Pension Programs the responsibility for reviewing and

determining whether a domestic relations order applying to the 401(k) Plan is

a QDRO. Appeals of a QDRO determination are made to PAWPAC. As with the ESOP,

the 401(k) Plan permits the immediate distribution of benefits under the plan

that are assigned pursuant to the terms of a QDRO. Although an alternate payee

may thus receive an immediate lump sum distribution from the 401(k) Plan,

participants or beneficiaries are entitled to distributions from the 401(k)

plan only following termination of employment (including by way of the

participant’s death) or upon financial hardship.

You represent that Pension Programs currently has under review 16

domestic relations orders concerning benefits under the ESOP and the 401(k)

Plan that Pension Programs believes may be “questionable” or “sham” in nature.

You detail the grounds for Pension Programs’ suspicions as to the nature

of these domestic relations orders as follows. Pension Programs received

within a very short period of time five domestic relations orders from the

same lawyer (two of the orders were mailed in the same envelope). Each order

related to participants working in United’s maintenance facility located in

Indianapolis, Indiana. Each of the five orders identically provided for an

assignment of 100 percent of the participant’s benefit in the ESOP and the

401(k) Plan to an alternate payee. Each order made no provision for any

assignment of these participants’ benefits in United’s defined benefit pension

plan. In each of the orders, the alternate payee and participant were shown as

having the same address. Despite its suspicions, Pension Programs determined

that each of the five orders was qualified because they satisfied the

requirements of section 206(d)(3) of ERISA. In Pension Programs’ view, these

orders differed from other domestic relations orders processed by Pension

Programs in that they dealt only with the ESOP and the 401(k)Plan; they

provided for assignment of 100 percent of the participant’s benefit; and they

showed the participant and alternate payee as having the same address.

After its determination that these five domestic relations orders were

QDROs, Pension Programs received and reviewed 16 other orders that had unusual

characteristics similar to those of the original five orders. These 16 orders

similarly provided for a 100 percent assignment of benefits payable under the

ESOP and/or the 401(k) Plan, made no mention of the defined benefit pension

plan, and specified in most cases that the alternate payee and participant

-2-

2

2Pension Programs processes between approximately 200 and 300 domestic relations orders

per year for all of its qualified retirement plans.

Appendix A 59
shared the same address. You represent that Pension Programs performed

additional investigation in its review of these 16 domestic relations orders

to determine whether they were qualified. While these orders were pending

review with Pension Programs, two participants from the Indiana facility

called at different times to determine the status of the review of their

orders. You indicate that, during those conversations, each participant

asserted that his order was not one of the “fraudulent QDROs.” You represent

that these statements led Pension Programs to heighten its scrutiny of the 16

orders assigning 100 percent of the participant’s right to the ESOP and 401(k)

benefits.

You further represent that, after beginning its investigation of the 16

domestic relations orders in question, Pension Programs learned of a pamphlet

entitled “Retirement Liberation Handbook” that was being distributed by at

least one United employee in the Indianapolis, Indiana area. The pamphlet

advocated, as a method of acquiring a distribution of pension plan benefits

before reaching retirement age, that participants and their spouses obtain a

divorce for the sole purpose of securing a court order assigning pension plan

benefits and then remarry. Such a sham divorce, according to the Liberation

Handbook, would enable the participant to obtain direct control over the

investment of the participant’s pension benefit. The Liberation Handbook also

suggested that single employees could go through a sham marriage and

subsequent divorce, by paying an individual a percentage of the anticipated

pension distribution as compensation for acting as spouse, or could instead

quit employment in order to obtain a similar early distribution and later get

rehired. The Handbook described in some detail how distributions from pension

plans are handled for tax purposes and discussed various options for

distributions and investments of the distributions.

After reviewing the Liberation Handbook, Pension Programs determined

that all of the 16 orders in question, as well as the original five orders it

had previously deemed qualified, had significant similarities to the specific

format promoted by the Liberation Handbook. For example, two of the initial

five orders requested that distribution be made to an inappropriate account

named in the Liberation Handbook.

In addition, all of the orders identified by Pension Programs as

questionable relate to the ESOP and 401(k) benefits of employees who, at the

time of the order, resided in the Indianapolis area and were in related work

groups, and all had a number of common characteristics not typically seen in

Pension Programs’ review of domestic relations orders. Included in these were

rapid remarriage and continued use by the putative alternate payee of United’s

no-cost travel for spouses.

-3-

3You represent that United pays all expenses related to the administration of domestic

relations orders and QDROs, including all of the investigative efforts relating

to any questionable QDROs and all legal expenses. You state that no plan assets of

either the ESOP or the 401(k) Plan have been used directly or indirectly to pay

for the expenses of investigating the QDROs at issue here.

4The Liberation Handbook apparently first appeared in the classified section of a local

advertising exchange.

3

4

60 Appendix A
You represent that Pension Programs engaged local counsel in Indiana

to determine whether and to what extent the questionable domestic relations

orders might be valid under Indiana law. Indiana counsel opined that, if the

orders had been obtained as promoted by the Liberation Handbook, (i) the

participant and alternate payee would have committed perjury; (ii) the

parties would be in contempt of court; (iii) the order would have been

fraudulently obtained; and (iv) if the foregoing could be established to the

satisfaction of a judge, the order likely would be vacated by the court.

You have asked for an advisory opinion as to whether, and if so when, a

plan administrator may investigate or question a domestic relations order

submitted for review to determine whether it is a valid “domestic relations

order” under State law for purposes of section 206(d)(3)(B) of ERISA.

Section 206(d)(1) of ERISA generally requires pension plans covered by

Title I of ERISA to provide that plan benefits may not be assigned or

alienated. Section 206(d)(3)(A)of ERISA states that section 206(d)(1)

applies to an assignment or alienation of benefits pursuant to a “domestic

relations order” unless the order is determined to be a “qualified domestic

relations order” (QDRO). Section 206(d)(3)(A)further provides that pension

plans must provide for payment of benefits in accordance with the applicable

requirements of any QDRO.

Section 206(d)(3)(B) of ERISA defines the terms “qualified domestic

relations order” and “domestic relations order” for purposes of section

206(d)(3) as follows:

B) For purposes of [section 206(d)(3)] —

(i) the term “qualified domestic relations order” means a domestic

 relations order —

(I) which creates or recognizes the existence of an alternate

 payee’s right to, or assigns to an alternate payee the right

 to, receive all or a portion of the benefits payable with

 respect to a participant under a plan, and

(II) with respect to which the requirements of subparagraphs (C)

 and (D) are met, and

(ii) the term “domestic relations order” means any judgment, decree,

 or order (including approval of a property settlement

 agreement)which —

(I) relates to the provision of child support, alimony payments,

 or marital property rights to a spouse, former spouse, child,

 or other dependent of a participant, and

(II) is made pursuant to a State domestic relations law (including

 a community property law).

-4-

Appendix A 61
Section 206(d)(3)(C) requires that in order for a domestic relations

order to be qualified such order must clearly specify (i) the name and the

last known mailing address (if any) of the participant and the name and

mailing address of each alternate payee covered by the order; (ii) the amount

or percentage of the participant’s benefits to be paid by the plan to each

such alternate payee, or the manner in which such amount or percentage is to

be determined; (iii) the number of payments or period to which such order

applies; and (iv) each plan to which the order applies.

Section 206(d)(3)(D) specifies that a domestic relations order is

qualified only if such order does not require (i) the plan to provide any type

of benefit, or any option, not otherwise provided by the plan; (ii) the plan

to provide increased benefits (determined on the basis of actuarial value);

and (iii) the payment of benefits to an alternate payee that are required to

be paid to another alternate payee under another order previously determined

to be a qualified domestic relations order.

Section 206(d)(3)(G) of ERISA requires the plan administrator to

determine the qualified status of domestic relations orders received by the

plan and to administer distributions under such qualified orders, pursuant to

reasonable procedures established by the plan. In administering QDROs, plan

administrators must follow the plan’s reasonable procedures, as required under

section 206(d)(3)(G), and must assure that the plan pays only reasonable

expenses of administering the plan, as required by sections 403(c)(1) and

404(a)(1)(A) of ERISA. In this regard, plan fiduciaries must take appropriate

steps to ensure that plan procedures are designed to be cost effective and to

minimize expenses associated with the administration of domestic relations

orders. See Advisory Opinion 94-32A (Aug. 4, 1994).

When a pension plan receives an order requiring that all or a part of

the benefits payable with respect to a participant be paid to an alternate

payee, the plan administrator must determine that the judgment, decree or

order is a “domestic relations order” within the meaning of section

206(d)(3)(B)(ii) of ERISA — i.e., that it relates to the provision of child

support, alimony payments, or marital property rights to a spouse, former

spouse, child or other dependent of the participant and that it is made

pursuant to State domestic relations law by a State authority with

jurisdiction over such matters. Additionally, the plan administrator must

determine that the order is qualified under the requirements of section

206(d)(3) of ERISA. It is the view of the Department that the plan

administrator is not required by section 206(d)(3) or any other provision of

Title I to review the correctness of a determination by a competent State

authority pursuant to State domestic relations law that the parties are

entitled to a judgment of divorce. See Advisory Opinion 92-17A (Aug. 21,

1992). Nevertheless, a plan administrator who has received a document

purporting to be a domestic relations order must carry out his or her

responsibilities under section 206(d)(3) in a manner consistent with the

general fiduciary duties in part 4 of Title I of ERISA.

-5-

62 Appendix A
For example, if the plan administrator has received evidence calling

into question the validity of an order relating to marital property rights

under State domestic relations law, the plan administrator is not free to

ignore that information. Information indicating that an order was

fraudulently obtained calls into question whether the order was issued

pursuant to State domestic relations law, and therefore whether the order is

a “domestic relations order” under section 206(d)(3)(C). When made aware of

such evidence, the administrator must take reasonable steps to determine its

credibility. If the administrator determines that the evidence is credible,

the administrator must decide how best to resolve the question of the

validity of the order without inappropriately spending plan assets or

inappropriately involving the plan in the State domestic relations

proceeding. The appropriate course of action will depend on the actual facts

and circumstances of the particular case and may vary depending on the

fiduciary’s exercise of discretion. However, in these circumstances, we note

that appropriate action could include relaying the evidence of invalidity to

the State court or agency that issued the order and informing the court or

agency that its resolution of the matter may affect the administrator’s

determination of whether the order is a QDRO under ERISA. The plan

administrator’s ultimate treatment of the order could then be guided by the

State court or agency’s response as to the validity of the order under State

law. If, however, the administrator is unable to obtain a response from the

court or agency within a reasonable time, the administrator may not

independently determine that the order is not valid under State law and

therefore is not a “domestic relations order” under section 206(d)(3)(C),

but should rather proceed with the determination of whether the order is a

QDRO.

This letter constitutes an advisory opinion under ERISA Procedure 76-1,

41 Fed. Reg. 36281 (1976). Accordingly, this letter is issued subject to the

provisions of that procedure, including section 10 thereof, relating to the

effect of advisory opinions.

Sincerely,

Susan G. Lahne

Acting Chief, Division of

 Fiduciary Interpretations

 Office of Regulations

 and Interpretations

-6-

5

5Appropriate action could take other forms, depending on the circumstances and the

fiduciary’s assessment of the relative costs and benefits, including actual intervention

in or initiation of legal proceedings in State court.

Appendix A 63
July 12, 2000

Gail Inman-Campbell 2000-09A

Walker, Campbell & Campbell ERISA SEC.

Suite 201 Security Plaza 206(d)(3)

P.O. Box 1940

Harrison, Arkansas 72602-1940

Dear Ms. Inman-Campbell:

This is in response to your request for an advisory opinion under

section 206(d)(3) of ERISA. You raise questions regarding the proper

treatment of a domestic relations order that assigns to an alternate payee a

“company-paid survivor benefit.” The terms of the affected pension plan

makes this company-paid survivor benefit payable only to a beneficiary

designated by the participant from within a limited class of individuals

(either the participant’s surviving spouse, the participant’s minor child or

children, or the participant’s parent or parents). According to your

representations, the survivor benefit in question is not the qualified joint

and survivor annuity (QJSA) benefit that is mandated by section 205 of

ERISA, but is provided by the plan in addition to the QJSA benefit.

Specifically, you ask whether an order requiring the company-paid survivor

benefit to be paid to the participant’s former spouse, who had been named by

the participant as the designated beneficiary under the plan prior to the

divorce and as of the date of the participant’s retirement, could constitute

a “qualified domestic relations order” (QDRO) within the meaning of section

206(d)(3) of ERISA.

You represent the applicable facts to be as follows. The plan

participant was married when he retired from employment. In connection with

his retirement, the participant and his then-wife executed the necessary

forms to entitle him to begin to receive his retirement benefits under the

employer’s defined benefit pension plan (the Plan). You further state that

the participant elected, with his wife’s consent, to decline to receive his

benefits under the Plan in the form of a qualified joint and survivor

annuity (QJSA) and elected instead to receive a single life annuity. The

consent form executed by the participant’s wife stated:

I, [the participant’s spouse], hereby acknowledge that I have read the

notification on the reverse side regarding post-retirement survivor

benefits under the [Plan] and consent to waive my right to receive

such benefits as the participant’s spouse under the Retirement Equity

1

2

1Although the participant and his wife were married at the time he retired, they

subsequently divorced. For the sake of clarity, and because the change in status is

relevant to the analysis, this opinion refers to the participant’s former spouse

variously (depending on the relevant time period) as either the participant’s wife or the

participant’s former wife.

2The Department does not interpret the terms of individual pension plans and has

relied, in reaching the conclusions expressed herein, on your representations as to the

terms of the Plan and the manner in which those terms are interpreted by the Plan

administrator. The Department takes no position regarding the correctness of the

representations.

64 Appendix A
Act. I also understand that my spouse has authority to specify a

beneficiary without my knowledge or consent and that I will not

receive any benefit under the Plan unless specified as a beneficiary

by my spouse.

You represent that, in addition to providing the QJSA form of benefit,

the Plan provides a company-paid survivor benefit (described below), to which

the participant had earned a vested right. This company-paid survivor benefit

provides monthly payments to “the surviving spouse of an active employee, the

spouse at retirement of a former employee, or a survivor or survivors

specified by [the participant] in such a manner as the Board of Benefits and

Pensions may prescribe.” Plan, Section VI.A (1). You state that the Plan

generally limits the categories of survivors whom the participant may

designate to receive the company-paid survivor benefit to the following:

(1) the employee’s spouse (with payments to minor children following the

spouse’s death); (2) the employee’s minor children; or (3) a parent or

stepparent of the employee.

In connection with his retirement, the participant designated his wife,

together with their then-minor child, as the beneficiaries for the companypaid survivor benefit. That designation has remained in effect unchanged

since it was executed. The participant began receiving monthly annuity

benefits under the Plan at his retirement and has continued receiving such

benefits since that time.

A state court some time later issued a divorce decree dissolving the

marriage of the participant and his wife. Thereafter, a Nunc Pro Tunc

Supplemental Divorce Decree, (the domestic relations order), described a

division of the participant’s benefits under the Plan. The domestic relations

order assigned to the former wife, as alternate payee, a certain portion of

the participant’s life annuity payments. The domestic relations order further

provided that the former wife “shall be treated as a surviving spouse, as she

was the Participant’s spouse at his retirement, and that [she] shall receive

the employer paid survivor benefits as stated under [the plan].”

After the domestic relations order was submitted to the Plan, the Plan

Administrator rejected the domestic relations order as not qualified with

respect to the provision of survivor benefits, stating:

The order attempts to force the Plan to provide a type or form

of benefit not otherwise available under the Plan. As explained

in previous determination reports, there are no survivor

benefits available for any alternate payee. There are no

survivor benefits available for [the participant’s ex-wife]. The

3

3An earlier order that had purported to assign the right of a surviving spouse to

receive survivor benefits in the form of the qualified joint and survivor annuity (QJSA)

under section 205 of ERISA (section 401(a)(11) of the Internal Revenue Code) to the

participant’s former wife was rejected by the Plan as not qualified because the former

wife had validly consented to the waiver of those rights. You represent that the former

wife does not dispute that she properly waived her right under federal law to receive

survivor benefits in the form of a QJSA.

-2-

Appendix A 65
court cannot award the Company-paid survivor benefit to [the

participant’s ex-wife] because she is not a Plan-qualified

beneficiary. The court cannot award a non-existent benefit to an

alternate payee.

* * * * *

At his retirement, [the participant] designated his spouse, [the

participant’s former wife], as the beneficiary for the Companypaid survivor benefit. Pursuant to the terms of the Plan, the

Company-paid survivor benefit can be paid only to a Planqualified beneficiary — spouse, minor children, parent, or

stepparent, not a former spouse. At the time of his retirement,

[the participant] designated his spouse and a minor child to

receive the Company-paid survivor benefit. During the remaining

10+ years that the parties remained married, [the participant]

controlled the beneficiary designation for the Company-paid

survivor benefit. At any time during the remainder of the

marriage, [the participant] could change the beneficiary to any

other Plan-qualified beneficiary or to no one without [the

participant’s former wife’s] consent.

(Emphasis original).

You ask whether the Plan is correct in concluding that, in ordering the

company-paid survivor benefit to be paid to the participant’s former wife, the

domestic relations order would require the Plan to provide a “type or form of

benefit, or [an] option not otherwise provided” under the Plan, which is not

permitted under section 206(d)(3)(D)(i) of ERISA. As explained below, it is

the view of the Department that the Plan erred in reaching this conclusion.

Section 206(d)(1) of ERISA generally requires pension plans covered by

Title I of ERISA to provide that plan benefits may not be assigned or

alienated. Section 206(d)(3)(A) of ERISA states that section 206(d)(1) applies

to an assignment or alienation of benefits pursuant to a “domestic relations

order,” unless the order is determined to be a “qualified domestic relations

order.” Section 206(d)(3)(A) further provides that pension plans must provide

for payment of benefits in accordance with the applicable requirements of any

QDRO.

Section 206(d)(3)(B) of ERISA defines the terms “qualified domestic relations

order” and “domestic relations order” for purposes of section 206(d)(3) as

follows:

(B) For purposes of [section 206(d)(3)] —

(i) the term “qualified domestic relations order” means a

 domestic relations order —

(I) which creates or recognizes the existence of an

alternate payee’s right to, or assigns to an

alternate payee the right to, receive all or a

-3-

66 Appendix A
portion of the benefits payable with respect to a

participant under a plan, and

(II) with respect to which the requirements of

 subparagraphs (C) and (D) are met, and

(ii) the term “domestic relations order” means any judgment,

 decree, or order (including approval of a property

 settlement agreement) which —

(I) relates to the provision of child support, alimony

 payments, or marital property rights to a spouse,

 former spouse, child, or other dependent of a

 participant, and

(II) is made pursuant to a State domestic relations law

 (including a community property law).

Section 206(d)(3)(D) specifies that a domestic relations order is

qualified only if such order does not require (i) the plan to provide any type

of benefit, or any option, not otherwise provided by the plan; (ii) the plan

to provide increased benefits (determined on the basis of actuarial value);

and (iii) the payment of benefits to an alternate payee which are required to

be paid to another alternate payee under another order previously determined

to be a qualified domestic relations order.

Section 206(d)(3)(F) of ERISA provides, with respect to the joint and

survivor and pre- retirement annuity provisions in ERISA, that, “[t]o the

extent provided in any qualified domestic relations order”:

(i) the former spouse of a participant shall be treated as a

 surviving spouse of such participant for purposes of section

 205 (and any spouse of the participant shall not be treated

 as a spouse of the participant for such purposes), and

(ii) if married for at least 1 year, the surviving spouse shall

 be treated as meeting the requirements of section 205(f).

It is our view that section 206(d)(3)(F) does not, in itself, limit

the scope of the survivor benefits that may be assigned to an alternate

payee pursuant to section 206(d)(3)(B). Rather, the general scope of

permissible assignment is defined by section 206(d)(3)(B) itself, as limited

by sections 206(d)(3)(C) and 206(d)(3)(D). Section 206 (d)(3)(B) provides

4Section 206(d)(3)(F) provides an additional right that may be assigned to an alternate

payee: the right to be treated as if the divorce had not occurred with respect to the

survivor rights created by section 205 of ERISA. The section 205 rights include, but

extend beyond, the right to receive the survivor portion of the joint and survivor

annuity form of benefit payment that must be provided as the normal form of payment

under a plan subject to section 205. Section 206(d)(3)(E) further permits alternate

payees to be afforded the right to receive benefit payments as of a participant’s

“earliest retirement age,” rather than when the participant is entitled to receive

benefit payments.

-4-

Appendix A 67

4
broadly for the possibility of assigning not merely “benefits payable to a

participant,” but “all or a portion of the benefits payable with respect to

a participant under a plan.” In using this particular language, Congress

made clear that the QDRO provisions are intended to enable State courts or

agencies to assign any and all benefits payable under a plan that a

participant had earned through employment.

Further, any assignment effected by a QDRO necessarily has the effect

of requiring the substitution of an alternate payee for the individual

(participant or beneficiary) who would otherwise be entitled to receive the

benefit under the terms of the plan in question. The Plan’s conclusion that

such a substitution would require the Plan to provide a “type or form of

benefit, or any option, not otherwise provided” under the Plan, in violation

of section 206(d)(3)(D), thus, proves too much. Such an argument would

invalidate any assignment of benefits pursuant to a domestic relations order.

In this case, the alternate payee was the individual actually designated

by the participant as his beneficiary to receive the Company-paid survivor

benefit. At his retirement, and until their subsequent divorce, the alternate

payee was also within the class of individuals expressly entitled under the

terms of the Plan to be named as beneficiary. The order did no more than

preserve the alternate payee’s status as a spouse with respect to the

Company-paid survivor benefit when the divorce would otherwise have altered

that status. The assignment effected by the order, thus, would not require

the Plan to provide a type or form of benefit, or an option not otherwise

provided under the Plan. It is the view of the Department that, under the

circumstances of this case as you have described them, the Plan

Administrator erred in concluding that an order that named a participant’s

former spouse as beneficiary for the Company-paid survivor benefit would

violate the limitations imposed by section 206(d)(3)(D) and therefore could

not constitute a QDRO.

This letter constitutes an advisory opinion under ERISA Procedure 76-1,

41 Fed. Reg. 36281 (1976). Accordingly, this letter is issued subject to the

provisions of that procedure, including section 10 thereof, relating to the

effect of advisory opinions.

Sincerely,

Louis Campagna

Chief, Division of

Fiduciary Interpretations

Office of Regulations

and Interpretations

5

5A domestic relations order, nonetheless, could not be deemed to be qualified if it

assigned benefits that have already been paid or have been validly waived under a plan.

For example, if an alternate payee has validly waived QJSA rights, as the participant’s

former wife apparently did when the participant retired, a subsequently issued domestic

relations order could not require a plan to provide QJSA rights to the alternate payee.

-5-

68 Appendix A
June 1, 2001

Lee Sapienza 2001-06A

Chief, Bureau of Policy and Planning ERISA SEC.

Division of Child Support Enforcement 206(d)(3)

Office of Temporary and Disability Assistance

40 North Pearl Street

Albany, NY 12243-0001

Dear Mr. Sapienza:

This is in response to your request for guidance regarding the qualified

domestic relations order (QDRO) provisions of the Employee Retirement Income

Security Act of 1974, as amended (ERISA). In particular, you ask whether an

income withholding notice issued by the New York State Office of Temporary and

Disability Assistance, Division of Child Support Enforcement (DCSE), or a

county child support enforcement agency operating under DCSE guidelines, is a

“judgment, decree, or order” within the meaning of section 206(d)(3)(B)(ii) of

ERISA.

DCSE is a State agency that administers the programs under Part D of

Title IV of the Social Security Act (Title IV-D), generally known as the Child

Support Enforcement (CSE), or IV-D, program, for the State of New York. The

Federal Office of Child Support Enforcement (OCSE), Department of Health and

Human Services, has the responsibility to establish standards for State IV-D

agencies, and manages the distribution of Federal funding to the State IV-D

agencies.

Section 466(a) of the Social Security Act (the Act) requires that, as a

condition for receiving Federal funding under Title IV-D, States have

procedures to effectuate withholding from the income of obligors amounts

payable as child support in cases that are subject to enforcement by the

State. Section 466(b) of the Act prescribes procedures that the States must

provide for with respect to such income withholding. That section also defines

“income” for purposes of the withholding requirements to include periodic

payments due to an individual pursuant to a pension or retirement program. You

represent that State IV-D agencies, including DCSE, routinely issue income

withholding notices pursuant to Federal and State law to enforce child support

orders against obligor parents. The child support orders are made

pursuant to State family or domestic relations law. The income withholding

notices may seek to enforce the child support obligation from various sources

of income, including benefits due to a participant in a pension plan.

You represent that notices issued by DCSE and county child support

enforcement agencies are frequently determined not to be QDROs by plan

1

1References to the Internal Revenue Code sections that parallel the provisions of

section 206(d)(3) of ERISA (the QDRO provisions) are omitted from the following, but

may be assumed to be incorporated by reference when the parallel provision of section

206(d)(3) is cited.

Appendix A 69
administrators. You represent that these plan administrators contend that an

income withholding notice is not a “judgment, decree, or order,” and

therefore not a “domestic relations order” as defined in section

206(d)(3)(B)(ii) of ERISA. As a result, when a pension plan rejects an

income withholding notice, DCSE or the county child support enforcement

agency must obtain a court order requiring the plan to withhold the

necessary child support payments, which order then generally will be

accepted as a QDRO by plan administrators.

Section 206(d)(1) of ERISA generally requires that benefits provided

under a pension plan may not be assigned or alienated. Section 206(d)(3)(A)

of ERISA provides that the anti- assignment and alienation provisions of

section 206(d)(1) apply to the assignment or alienation of benefits pursuant

to a “domestic relations order,” unless the order is determined to be a

“qualified domestic relations order.” Section 206(d)(3)(A) further provides

that pension plans must provide for the payment of benefits in accordance

with the applicable requirements of any QDRO.

Section 206(d)(3)(B) of ERISA defines the term “qualified domestic

relations order” for purposes of section 206(d)(3) as a domestic relations

order “which creates or recognizes the existence of an alternate payee’s

right to, or assigns to an alternate payee the right to, receive all or a

portion of the benefits payable with respect to a participant under a plan,”

and which meets the requirements of section 206(d)(3)(C) and (D).

The term “domestic relations order” is defined in section

206(d)(3)(B)(ii) as “any judgment, decree, or order (including approval of a

property settlement agreement) which relates to the provision of child

support, alimony payments, or marital property rights to a spouse, former

spouse, child, or other dependent of a participant, and is made pursuant to

a State domestic relations law (including a community property law).”

2

2Section 206(d)(3)(C) provides that in order for a domestic relations order to be

qualified, the order must clearly specify (i) the name and last known mailing address

(if any) of the participant and the name and mailing address of each alternate payee

covered by the order; (ii) the amount or percentage of the participant’s benefits to

be paid by the plan to each such alternate payee, or the manner in which such amount

or percentage is to be determined; (iii) the number of payments or period to which

such order applies; and (iv) each plan to which the order applies.

Section 206(d)(3)(D) specifies that a domestic relations order is not qualified if it

requires (i) the plan to provide any type of benefit, or any option, not otherwise

provided by the plan; (ii) the plan to provide increased benefits (determined on the

basis of actuarial value); or (iii) the payment of benefits to an alternate payee

which are required to be paid to another alternate payee under another order

previously determined to be a qualified domestic relations order. Section 206(d)(3)(E)

provides that an order may not provide that an alternate payee receive a benefit

earlier than the date on which the participant reaches his or her “earliest retirement

age,” unless the plan permits payments at an earlier date. “Earliest retirement age”

is defined as the earlier of (1) the date on which the participant is entitled to

receive a distribution under the plan, or (2) the later of (a) the date the

participant reaches age 50 or (b) the earliest date on which the participant could

begin receiving benefits under the plan if the participant separated from service with

the employer.

-2-

70 Appendix A
The term “alternate payee” is defined by ERISA section 206(d)(3)(K) to

mean “any spouse, former spouse, child or other dependent of a participant

who is recognized by a domestic relations order as having a right to receive

all, or a portion of, the benefits payable under a plan with respect to such

participant.”

Section 206(d)(3)(G) of ERISA requires the plan administrator to

determine whether a domestic relations order received by the plan is

qualified, and to administer distributions under such qualified orders,

pursuant to reasonable procedures established by the plan.

When a pension plan receives an order requiring that all or part of

the benefits payable with respect to a participant be distributed to an

alternate payee, the plan administrator must determine that the judgment,

decree, or order is a “domestic relations order” within the meaning of

section 206(d)(3)(B)(ii) of ERISA - i.e., that it relates to the provision

of child support, alimony payments, or marital property rights to a spouse,

former spouse, child, or other dependent of the participant, and that it is

made pursuant to a State domestic relations law by a State authority with

jurisdiction over such matters. Additionally, the plan administrator must

determine that the order is qualified under the requirements of section

206(d)(3)(B)(i) of ERISA.

It is the view of the Department that an income withholding notice

issued by DCSE or county child support enforcement agencies (as described in

your submission) as part of the State’s IV-D program, is a “domestic relations

order” as defined in section 206(d)(3)(B)(ii) of ERISA. The notice relates to

the provision of child support to a child of a participant in a pension plan,

enforces a child support order that is made pursuant to State family or

domestic relations law, and is made by DCSE or a county child support

enforcement agency, which have jurisdiction over child support matters. We

note in particular that section 206(d)(3)(B)(ii) does not specify that in

order for a judgment, decree, or order to be a “domestic relations order” for

the purposes of section 206(d)(3) that it must be issued by a court.

While a withholding notice issued by DCSE may constitute a “domestic relations

order” for purposes of section 206(d)(3) of ERISA, the administrator of a

pension plan that receives such a notice is still obligated to determine

whether the notice is a “qualified domestic relations order” as defined in

section 206(d)(3)(B). Whether any notice issued by the State, including the

“Order/Notice To Withhold Income For Child Support” (the form developed by

OCSE that State IV-D agencies are required to use to enforce child support

obligations), satisfies the requirements of section 206(d)(3)(C) and (D) is

an inherently factual question on which the Department is unable to opine.

-3-

Appendix A 71
This letter constitutes an advisory opinion under ERISA Procedure 76-

1. Accordingly, it is issued subject to the provisions of the procedure,

including section 10 thereof relating to the effect of advisory opinions.

Sincerely,

Louis Campagna

Chief, Division of Fiduciary

Interpretations

Office of Regulations

and Interpretations

-4-

72 Appendix A
Appendix B

ERISA

Advisory Opinion Procedure

73
Appendix B 75

ERISA Proc. 76-1—Procedure for ERISA Advisory Opinions. ERISA Proc. 76-1—Procedure for ERISA Advisory Opinions.

It is the practice of the Department of Labor (the Department)

to answer inquiries of individuals or organizations affected, directly

or indirectly, by the Employee Retirement Income Security Act of 1974

(Pub. L. 93-406, hereinafter “the Act”) as to their status under the

Act and as to the effect of certain acts and transactions. The answer

to such inquiries are categorized as “information letters” and

“advisory opinions.” This “ERISA Procedure” (ERISA Proc. 76-1)

describes the general procedures of the Department in issuing

information letters and advisory opinions under the Act, and is

designed to promote efficient handling of inquiries and to facilitate

prompt responses.

Section 7 of this procedure (instructions to individuals and

organizations requesting advisory opinions relating to prohibited

transactions and common definitions) is reserved. This section will

set forth the procedures to be followed to obtain an advisory opinion

relating to prohibited transactions and common definitions, such as

whether a person is a party in interest and a disqualified person. In

general, this section will incorporate a revenue procedure to be

published by the Internal Revenue Service.

This advisory opinion procedure consists of rules of agency

procedure and practice, and is therefore excepted under 5 U.S.C.

552(b)(3)(A) of the Administrative Procedure Act from the ordinary

notice and comment provisions for agency rulemaking. Accordingly, the

procedure is effective August 27, 1976.

SEC. 1. Purpose. The purpose of this ERISA Procedure is to

describe the general procedures of the Department of Labor (the

Department) in issuing information letters and advisory opinions to

individuals and organizations under the Employee Retirement Income

Security Act of 1974 (Pub. L. 93-406), hereinafter referred to as “the

Act.” This ERISA Procedure also informs individuals and organizations,

and their authorized representatives, where they may direct requests

for information letters and advisory opinions, and outlines procedures

to be followed in order to promote efficient handling of their

inquiries.

SEC. 2. General practice. It is the practice of the Department

to answer inquiries of individuals and organizations, whenever

appropriate, and in the interest of sound administration of the Act,

The following first appeared in the Federal Register, Volume 41, No. 168, pg. 36281,

August 27, 1976.
76 Appendix B

as to their status under the Act and as to the effects of their acts

or transactions. One of the functions of the Department is to issue

information letters and advisory opinions in such matters.

SEC. 3. Definitions. .01 An “information letter” is a written

statement issued either by the Pension and Welfare Benefit Programs

(Office of Employee Benefit Security), U.S. Department of Labor,

Washington, D.C. or a Regional Office or an Area Office of the LaborManagement Services Administration, U.S. Department of Labor, that

does no more than call attention to a well-established interpretation

or principle of the Act, without applying it to a specific factual

situation. An information letter may be issued to any individual or

organization when the nature of the request from the individual or the

organization suggests that it is seeking general information, or where

the request does not meet all the requirements of section 6 or 7 of

this procedure, and it is believed that such general information will

assist the individual or organization.

.02 An “advisory opinion” is a written statement issued to an

individual or organization, or to the authorized representative

of such individual or organization, by the Administrator of

Pension and Welfare Benefit Programs or his delegate, that

interprets and applies the Act to a specific factual situation.

Advisory opinions are issued only by the Administrator of

Pension and Welfare Benefit Programs or his delegate.

.03 Individuals and organizations are those persons described in

section 4 of this procedure.

SEC. 4. Individuals and organizations who may request advisory

opinions or information letters. .01 Any individual or organization

affected directly or indirectly, by the Act may request an information

letter or an advisory opinion from the Department.

.02 A request by or for an individual or organization must be

signed by the individual or organization, or by the authorized

representative of such individual or organization. See section

7.03 of this procedure.

SEC. 5. Discretionary Authority to Render Advisory Opinions. .01

The Department will issue advisory opinions involving the

interpretation of the application of one or more sections of the Act,

regulations promulgated under the Act, interpretive bulletins, or

-2-
Appendix B 77

exemptions issued by the Department to a specific factual situation.

Generally, advisory opinions will be issued by the Department only

with respect to prospective transactions (i.e., a transaction which

will be entered into). Moreover, there are certain areas where,

because of the inherently factual nature of the problem involved, or

because the subject of the request for opinion is under investigation

for a violation of the Act, the Department ordinarily will not issue

advisory opinions. Generally, an advisory opinion will not be issued

on alternative courses of proposed transactions, or on hypothetical

situations, or where all parties involved are not sufficiently

identified and described, or where material facts or details of the

transaction are omitted.

.02 The Department ordinarily will not issue advisory opinions

relating to the following sections of the Act:

.02(a) Section 3(18), relating to whether certain consideration

constitutes adequate consideration;

.02(b) Section 3(26), relating to whether the valuation of any

asset is at current value;

.02(c) Section 3(27), relating to whether the valuation of any

asset is at present value;

.02(d) Section 102(a)(1), relating to whether a summary plan

description is written in a manner calculated to be understood

by the average participant.

.02(e) Section 103(a)(3)(A), relating to whether the financial

statements and schedules required to be included in the Annual

Report are presented fairly in conformity with generally

accepted accounting principles applied on a consistent basis;

.02(f) Section 103(b)(1), relating to whether a matter must be

included in a financial statement in order to fully and fairly

present the financial statement of the plan;

.02(g) Section 202 (other than section 202(a)(3) and (b)(1))

relating to minimum participation standards;

.02(h) Section 203 (other than sections 202(a)(3)(B), (b)(1)

(flush language), (b)(2), (b)(3)(A);

-3-
Appendix B

.02(i) Section 204 of the Act (other than sections 204(b)(1)(B),

(b)(1)(A), (C), (D), (E)), relating to benefit accrual

requirements;

.02(j) Section 205(e), relating to the period during which a

participant may elect in writing not to receive a joint and

survivor annuity;

.02(k) Section 208, relating to mergers and consolidation of

plans or transfer of plan assets;

.02(1) Section 209(a)(1), relating to whether the report

required by section 209(a)(1) is sufficient to inform the

employee of his accrued benefits under the plan, etc.

.02(m) Sections 302 through 305, relating to minimum funding

standards;

.02(n) Section 403(c)(1), relating to the purposes for which

plan assets must be held;

.02(o) Section 404(a), relating to fiduciary duties as applied

to particular conduct; and,

.02(p) Section 407(a)(2) and (3) and (c)(1), relating to fair

market value, as applied to whether the value of any particular

security or real property constitutes fair market value.

This list is not all inclusive and the Department may decline to

issue advisory opinions relating to other sections of the Act

whenever warranted by the facts and circumstances of a

particular case. The Department may, when it is deemed

appropriate and in the best interest of sound administration of

the Act, issue information letters calling attention to

established principles under the Act, even though the request

that was submitted was for an advisory opinion.

.03 Pending the adoption of regulations (either temporary or

final) involving the interpretation of the application of a

provision of the Act, consideration will be given to the

issuance of advisory opinions relating to such provisions of the

Act only under the following conditions:

.03(a) If an inquiry presents an issue on which the answer seems

to be clear from the application of the provisions of the Act to

-4-

78
Appendix B

the facts described, the advisory opinion will be issued in

accordance with the procedures contained herein.

.03(b) If an inquiry presents an issue on which the answer seems

reasonably certain but not entirely free from doubt, an advisory

opinion will be issued only if it is established to the

satisfaction of the Department, that a business emergency

requires an advisory opinion or that unusual hardship to the

plan or its participants and beneficiaries will result from

failure to obtain an advisory opinion. In any case in which the

individual or organization believes that a business emergency

exists or that an unusual hardship to the plan or its

participants and beneficiaries will result from the failure to

obtain an advisory opinion, the individual or organization

should submit with the request a separate letter setting forth

the facts necessary for the Department to make a determination

in this regard. In this connection, the Department will not deem

a “business emergency” to result from circumstances within the

control of the individual or organization such as, for example,

scheduling within an inordinately short time the closing date of

a transaction or a meeting of the Board of Directors or the

shareholders of a corporation.

.03(c) If an inquiry presents an issue that cannot be reasonably

resolved prior to the issuance of a regulation, an advisory

opinion will not be issued.

.04 The Department ordinarily will not issue advisory opinions

on the form or effect in operation of a plan, fund, or program

(or a particular provision or provisions thereof) subject to

Title I of the Act. For example, the Department will not issue

an advisory opinion on whether a plan satisfies the requirements

of Parts 2 and 3 of Title I of the Act.

SEC. 6. Instructions to individuals and organizations requesting

advisory opinions from the Department. .01 If an advisory opinion is

desired, a request should be submitted to: Advisory Opinion, Office of

Regulatory Standards and Exceptions, Pension and Welfare Benefit

Programs, U.S. Department of Labor, Washington, D.C. 20216.

-5-

79

* Office of Regulations and Interpretations, Room N5669, Employee Benefits Security Administration, U.S.

Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210.
80 Appendix B

.02 A request for an advisory opinion must contain the following

information:

.02(a) The name and type of plan or plans (e.g., pension,

profit-sharing, or welfare plan); the Employer Identification

Number (EIN); the Plan Number (PN) used by the plan in reporting

to the Department of Labor on Form EBS-1 or a copy of the first

two pages of the most recent Form EBS-1 filed with the

Department.

.02(b) A detailed description of the act or acts or transaction

or transactions with respect to which an advisory opinion is

requested. Where the request pertains to only one step of a

larger integrated act or transaction, the facts, circumstances,

etc., must be submitted with respect to the entire transaction.

In addition, a copy of all documents submitted must be included

in the individual’s or organization’s statement and not merely

incorporated by reference, and must be accompanied by an anlysis

of their bearing on the issue or issues, specifying the

pertinent provisions.

.02(c) A discussion of the issue or issues presented by the act

or acts or transaction or transactions which should be addressed

in the advisory opinion.

.02(d) If the individual or organization is requesting a

particular advisory opinion, the requesting party must furnish

an explanation of the grounds for the request, together with a

statement of relevant supporting authority. Even though the

individual or organization is urging no particular determination

with regard to a proposed or prospective act or acts or

transaction or transactions, the party requesting the ruling

must state such party’s views as to the results of the proposed

act or acts or transaction or transactions and furnish a

statement of relevant authority to support such views.

.03 A request for an advisory opinion by or for an individual or

organization must be signed by the individual or organization or

by the individual’s or organization’s authorized representative.

If the request is signed by a representative of an individual or

organization, or the representative may appear before the

Department in connection with the request, the request must

include a statement that the representative is authorized to

represent the individual or organization.

-6-

*
Appendix B 81

.04 A request for an advisory opinion that does not comply with

all the provisions of this procedure will be acknowledged, and

the requirements that have not been met will be noted.

Alternatively, at the discretion of the Department, the

Department will issue an information letter to the individual or

organization.

.05 If the individual or organization or the authorized

representative, desires a conference in the event the Department

contemplates issuing an adverse advisory opinion, such desire

should be stated in writing when filing the request or soon

thereafter in order that the Department may evaluate whether in

the sole discretion of the Department, a conference should be

arranged and at what stage of the consideration a conference

would be most helpful.

.06 It is the practice of the Department to process requests for

information letters and advisory opinions in regular order and

as expeditiously as possible. Compliance with a request for

consideration of a particular matter ahead of its regular order,

or by a specified time, tends to delay the disposition of other

matters. Requests for processing ahead of the regular order,

made in writing (submitted with the request or subsequent

thereto) and showing clear need for such treatment, will be

given consideration as the particular circumstances warrant.

However, no assurance can be given that any letter will be

processed by the time requested. The Department will not

consider a need for expedited handling to arise if the request

shows such need has resulted from circumstances within the

control of the person making the request.

.07 An individual or organization, or the authorized

representative desiring to obtain information relating to the

status of his or her request for an advisory opinion may do so

by contacting the Office of Regulatory Standards and Exceptions,

Pension and Welfare Benefit Programs, U.S. Department of Labor,

Washington, D.C.

SEC. 7. Instructions to individuals and organizations requesting

advisory opinions relating to prohibited transactions and common

definitions. .01 [Reserved]

-7-
Appendix B

.02 [Reserved]

.03 [Reserved]

SEC. 8. Conferences at the Department of Labor. If a conference

has been requested and the Department determines that a conference is

necessary or appropriate, the individual or organization or the

authorized representative will be notified of the time and place of

the conference. A conference will normally be scheduled only when the

Department in its sole discretion deems it will be necessary or

appropriate in deciding the case. If conferences are being arranged

with respect to more than one request for an opinion letter involving

the same individual or organization, they will be so scheduled as to

cause the least inconvenience to the individual or organization.

SEC. 9. Withdrawal of requests. The individual or organization’s

request for an advisory opinion may be withdrawn at any time prior to

receipt of notice that the Department intends to issue an adverse

opinion, or the issuance of an opinion. Even though a request is

withdrawn, all correspondence and exhibits will be retained by the

Department and will not be returned to the individual or organization.

SEC. 10. Effect of Advisory Opinion. An advisory opinion is an

opinion of the Department as to the application of one or more

sections of the Act, regulations promulgated under the Act,

interpretive bulletins, or exemptions. The opinion assumes that all

material facts and representations set forth in the request are

accurate, and applies only to the situation described therein. Only

the parties described in the request for opinion may rely on the

opinion, and they may rely on the opinion only to the extent that the

request fully and accurately contains all the material facts and

representations necessary to issuance of the opinion and the situation

conforms to the situation described in the request for opinion.

SEC. 11. Effect of Information Letters. An information letter

issued by the Department is informational only and is not binding on

the Department with respect to any particular factual situation.

SEC. 12. Public inspection. .01 Advisory opinions shall be open

to public inspection at the Public Disclosure Room, U.S. Department of

Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20216.

.02 Background files (including the request for an advisory

opinion, correspondence between the Department and the

-8-

82
Appendix B

individual or organization requesting the advisory opinion)

shall be available upon written request. Background files may be

destroyed after three years from the date of issuance.

.03 Advisory opinions will be modified to delete references to

proprietary information prior to disclosure. Any information

considered to be proprietary should be so specified in a

separate letter at the time of request. Other than proprietary

information, all materials contained in the public files shall

be available for inspection pursuant to section 12.02.

.04 The cost of search, copying and deletion of any references

to proprietary information will be borne by the person

requesting the advisory opinion or the background file.

SEC. 13. Effective date. This procedure is effective August 27,

1976, the date of its publication in the Federal Register.

Signed at Washington, D.C., this 24th day of August 1976.

James D. Hutchinson

Administrator of

Pension and Welfare Benefit Programs

U.S. Department of Labor

-9-

83
Appendix C

IRS Sample Language

for a Qualified Domestic

Relations Order

85
Appendix C 87

The following document, which contains sample language for inclusion in a

form for a QDRO and discussion of the sample language, was issued by the

Department of the Treasury and the Internal Revenue Service in compliance

with Congressional directives contained in the Small Business Job Protection

Act of 1986, section 1457(a)(2). It appeared in Internal Revenue Bulletin

1997-2 at p. 49 (Jan. 13, 1997). This document was developed in consultation

with the Department of Labor and is reprinted here for the convenience of with the Department of Labor and is reprinted here for the convenience of

the reader.

Part III - Administrative, Procedural and Miscellaneous

Sample Language for a Qualified Domestic Relations Order Sample Language for a Qualified Domestic Relations Order

Notice 97-11

I. PURPOSE

This Notice provides information intended to assist domestic relations attorneys, plan

participants, spouses and former spouses of participants, and plan administrators in drafting and

reviewing a qualified domestic relations order (“QDRO”). The Notice provides sample language

that may be included in a QDRO relating to a plan that is qualified under § 401(a) or § 403(a) of the

Internal Revenue Code of 1986 (“qualified plan” or “plan”) and that is subject to § 401(a)(13). The

Notice also discusses a number of issues that should be considered in drafting a QDRO. A QDRO

is a domestic relations order that provides for payment of benefits from a qualified plan to a spouse,

former spouse, child or other dependent of a plan participant and that meets certain requirements.

A. Statutory QDRO Requirements

Section 401(a)(13)(A) of the Code provides that benefits under a qualified plan may not be

assigned or alienated. Section 401(a)(13)(B) establishes an exception to the antialienation rule for

assignments made pursuant to domestic relations orders that constitute QDROs within the meaning

of § 414(p). A “domestic relations order” is defined in § 414(p)(1)(B) as any judgment, decree, or

order (including approval of a property settlement agreement) that (i) relates to the provision of

child support, alimony payments, or marital property rights to a spouse, former spouse, child, or

other dependent of a participant, and (ii) is made pursuant to a State domestic relations law (including

a community property law). There is no exception to the § 401(a)(13)(A) antialienation rule for

assignments made pursuant to domestic relations orders that are not QDROs.

Section 414(p)(1)(A) provides, in general, that a QDRO is a domestic relations order that

creates or recognizes the existence of an alternate payee’s right, or assigns to an alternate payee the

right, to receive all or a portion of the benefits payable with respect to a participant under a plan,

and that meets the requirements of paragraphs (2) and (3) of § 414(p). Section 414(p)(2) requires

that a QDRO clearly specify: (A) the name and last known mailing address (if any) of the participant

and of each alternate payee covered by the order, (B) the amount or percentage of the participant’s

benefits to be paid by the plan to each alternate payee, or the manner in which that amount or

percentage is to be determined, (C) the number of payments or period to which the order applies,

! ! ! !
Appendix C

and (D) each plan to which the order applies.

Section 414(p)(3) provides that a QDRO cannot require a plan to provide any type or form

of benefit, or any option, not otherwise provided under the plan; cannot require a plan to provide

increased benefits (determined on the basis of actuarial value); and cannot require the payment of

benefits to an alternate payee that are required to be paid to another alternate payee under another

order previously determined to be a QDRO. Section 414(p)(4)(A)(i) provides that a domestic relations

order shall not be treated as failing to meet the requirements of § 414(p)(3)(A) (and thus will not fail

to be a QDRO) solely because the order requires payment of benefits to an alternate payee on or

after the participant’s earliest retirement age, even if the participant has not separated from service

at that time. Section 414(p)(4)(B) defines earliest retirement age as the earlier of (i) the date on

which the participant is entitled to a distribution under the plan, or (ii) the later of (I) the date the

participant attains age 50, or (II) the earliest date on which the participant could begin receiving

benefits under the plan if the participant separated from service.

Section 414(p)(5) permits a QDRO to provide that the participant’s former spouse shall be

treated as the participant’s surviving spouse for purposes of §§ 401(a)(11) and 417 (relating to the

right to receive survivor benefits and requirements concerning consent to distributions), and that

any other spouse of the participant shall not be treated as a spouse of the participant for these

purposes. An alternate payee is defined under § 414(p)(8) as any spouse, former spouse, child or

other dependent of a participant who is recognized by a domestic relations order as having a right

to receive all, or a portion of, the benefits payable under a plan with respect to the participant.

Section 414(p)(10) provides that a plan shall not fail to satisfy the requirements of § 401(a), 401(k) or

403(b) solely by reason of payments made to an alternate payee pursuant to a QDRO.

B. Small Business Job Protection Act of 1996

Section 1457(a)(2) of the Small Business Job Protection Act of 1996 (“SBJPA”) directs the

Secretary of the Treasury (“Secretary”) to develop sample language for inclusion in a form for a

QDRO described in § 414(p)(1)(A) of the Code and §206(d)(3)(B)(i) of the Employee Retirement

Income Security Act of 1974 (“ERISA”) that meets the requirements contained in those sections,

and the provisions of which focus attention on the need to consider the treatment of any lump sum

payment, qualified joint and survivor annuity (“QJSA”), or qualified preretirement survivor annuity

(“QPSA”). Accordingly, the Service and Treasury are publishing the discussion and sample QDRO

language set forth in the Appendix to this Notice.

Section 1457(a)(1) of the SBJPA directs the Secretary to publish sample language that can be

included in a form that is used for a spouse to consent to a participant’s waiver of a QJSA or QPSA.

This sample language for use in spousal consent forms is contained in Notice 97-10 in this Bulletin.

C. Department of Labor Interpretive Authority

Section 206(d)(3) of ERISA (29 U.S.C. § 1056(d)(3)) contains QDRO provisions that are

substantially parallel to those of § 414(p) of the Code. The Department of Labor has jurisdiction to

interpret these provisions (except to the extent provided in § 401(n) of the Code) and the provisions

governing the fiduciary duties owed with respect to domestic relations orders and QDROs. Section

401(n) gives the Secretary of the Treasury the authority to prescribe rules or regulations necessary to

coordinate the requirements of §§ 401(a)(13) and 414(p), and the regulations issued by the Department

88
Appendix C

of Labor thereunder, with other Code provisions. The Department of Labor has reviewed this

Notice, including its Appendix, and has advised the Service and Treasury that the discussion and

sample language are consistent with the views of the Department of Labor concerning the statutory

requirements for QDROs. This Notice, including its Appendix, is not intended by the Service or

Treasury to convey interpretations of the statutory requirements applicable to QDROs, but only to

provide examples of language that may be (but are not required to be) used in drafting a QDRO that

satisfies these requirements.

II. SAMPLE LANGUAGE

The Appendix to this Notice has two parts. Part I discusses certain issues that should be

considered when drafting a QDRO. Part II contains sample language that will assist in drafting a

QDRO. Drafters who use the sample language will need to conform it to the terms of the retirement

plan to which the QDRO applies, and to specify the amounts assigned and other terms of the

QDRO so as to achieve an appropriate division of marital property or level of family support. A

domestic relations order is not required to incorporate the sample language in order to satisfy the

requirements for a QDRO, and a domestic relations order that incorporates part of the sample

language may omit or modify other parts.

The sample language addresses a variety of matters, but is not designed to address all

retirement benefit issues that may arise in each domestic relations matter or QDRO. Further, some

of the sample language, while helpful in facilitating the administration of a QDRO, is not necessarily

required for the order to satisfy the requirements for a QDRO. Alternative formulations would be

permissible for use in drafting orders that meet the statutory requirements for a QDRO.

III. OTHER SOURCES OF INFORMATION

The Pension Benefit Guaranty Corporation (“PBGC”) recently published a booklet entitled

Divorce Orders & PBGC, which discusses the special QDRO rules that apply for plans that have

been terminated and are trusteed by PBGC, and provides model QDROs for use with those plans.

This publication may be obtained by calling PBGC’s Customer Service Center at 1-800-400-PBGC or

electronically via the PBGC internet site at http://www.pbgc.gov

Additional information on the rights of participants and spouses to plan benefits can be

found in a two-booklet set published by the Service, entitled Looking Out for #2. These booklets

discuss retirement benefit choices under a defined contribution or a defined benefit plan, and may

be obtained by calling the Internal Revenue Service at 1-800-TAX-FORM, and asking for Publication

1565 (defined contribution plans) or Publication 1566 (defined benefit plans).

IV. COMMENTS

The Service invites the public to comment on the QDRO discussion and sample language

included in the Appendix to this Notice, and welcomes suggestions concerning possible additional

sample language. Comments may be submitted to the Internal Revenue Service at CC:DOM:CORP:R

(Notice 97-11), Room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,

D.C. 20044. Alternatively, taxpayers may hand-deliver comments between the hours of 8 a.m. and

89
Appendix C

5 p.m. to CC:DOM:CORP:R (Notice 97-11), Courier’s desk, Internal Revenue Service, 1111

Constitution Ave., N.W., Washington, D.C., or may submit comments electronically via the IRS

Internet site at http://www.irs.ustreas.gov/prod/tax_regs/comments.html

DRAFTING INFORMATION

The principal authors of this Notice are Diane S. Bloom of the Employee Plans Division and

Susan M. Lennon of the Office of the Associate Chief Counsel (Employee Benefits and Exempt

Organizations); however, other personnel from the Service and Treasury contributed to its

development. For further information regarding this Notice, please contact the Employee Plans

Division’s taxpayer assistance telephone service at (202) 622-6074/6075, between the hours of 1:30

p.m. and 4 p.m. Eastern Time, Monday through Thursday. Alternatively, please call Ms. Bloom at

(202) 622-6214 or Ms. Lennon at (202) 622-4606. Questions concerning QDROs may be addressed

to Susan G. Lahne of the Employee Benefits Security Administration, Department of Labor, at (202)

219-7461. These telephone numbers are not toll-free.

90
Appendix C

Appendix

Part I of this Appendix discusses certain issues that are relevant

in drafting a qualified domestic relations order (“QDRO”). Part II of

this Appendix contains sample language that can be used in a QDRO.

However, the discussion and sample language do not attempt to address

every issue that may arise in drafting a QDRO. Also, some parts of the

discussion are not relevant to all situations and some parts of the

sample language are not appropriate for all QDROs. In formulating a

particular QDRO, it is important that the drafters tailor the QDRO to

the needs of the parties and ensure that the QDRO is consistent with the

terms of the retirement plan to which the QDRO applies.

PART I. DISCUSSION OF QDRO REQUIREMENTS AND RELATED ISSUES

In order to be recognized as a QDRO, an order must first be a

“domestic relations order.” A domestic relations order is any judgment,

decree or order (including approval of a property settlement) which (i)

relates to the provision of child support, alimony payments or marital

property rights to a spouse, former spouse, child or other dependent of

the plan participant, and (ii) is made pursuant to a State domestic

relations law (including a community property law). A State authority

must actually issue an order or formally approve a proposed property

settlement before it can be a domestic relations order. A property

settlement signed by a participant and the participant’s former spouse

or a draft order to which both parties consent is not a domestic relations

order until the State authority has adopted it as an order or formally

approved it and made it part of the domestic relations proceeding.

The sample language in Part II assumes that the QDRO applies to one

qualified plan and one alternate payee. If a QDRO is intended to cover

more than one qualified plan or alternate payee, the QDRO should clearly

state which qualified plan and which alternate payee each provision is

intended to address.

The terms of a qualified plan must be set forth in a written

document. The plan must also establish written QDRO procedures to be

used by the plan administrator in determining whether a domestic relations

order is a QDRO and in administering QDROs. The plan administrator

maintains copies of the plan document and the plan’s QDRO procedures.

If the plan is required under Federal law to have a summary plan description,

or “SPD,” the plan administrator will also have a copy of the SPD. The

information in these documents is helpful in drafting a QDRO. The

drafter of a QDRO may wish to obtain copies of these documents before

drafting a QDRO.

91
92 Appendix C

A. IDENTIFICATION OF PARTICIPANT AND ALTERNATE PAYEE

A QDRO must clearly specify the name and last known mailing address

(if any) of the participant and of each alternate payee covered by the

QDRO. In the event that an alternate payee is a minor or legally

incompetent, the QDRO should also include the name and address of the

alternate payee’s legal representative. A QDRO can have more than one

alternate payee, such as a former spouse and a child.

The “participant” is the individual whose benefits under the plan

are being divided by the QDRO. The participant’s spouse (or former

spouse, child, or other dependent) who receives some or all of the

plan’s benefits with respect to the participant under the terms of the

QDRO is the “alternate payee.”

B. IDENTIFICATION OF RETIREMENT PLAN

A QDRO must clearly identify each plan to which the QDRO applies.

A QDRO can satisfy this requirement by stating the full name of the plan

as provided in the plan document.

C. AMOUNT OF BENEFITS TO BE PAID TO ALTERNATE PAYEE

A QDRO must clearly specify the amount or percentage of the

participant’s benefits in the plan that is assigned to each alternate

payee, or the manner in which the amount or percentage is to be determined.

Many factors should be taken into account in determining which benefits

to assign to an alternate payee and how these benefits are to be assigned.

The following discussion highlights some of these factors. Because of

the complexity and variety of the factors that should be considered, and

the need to tailor the assignment of benefits under a QDRO to the

individual circumstances of the parties, specific sample language regarding

the assignment of benefits has not been provided in Part II of this

Appendix.

1. Types of Benefits

In order to decide how to divide benefits under a QDRO, the drafter

first should determine the types of benefits the plan provides. Most

benefits provided by qualified plans can be classified as (1) retirement

benefits that are paid during the participant’s life and (2) survivor

benefits that are paid to beneficiaries after the participant’s death.

Generally, a QDRO can assign all or a portion of each of these types of

benefits to an alternate payee. The drafters of a QDRO should coordinate

the assignment of these types of benefits. QDRO drafters should also

consider how the benefits divided under the QDRO may be affected, under the

plan, by the death of either the participant or the alternate payee.
Appendix C 93

2. Types of Qualified Plans

Another important factor to consider in the drafting of a QDRO is

the type of plan to which the QDRO will apply. As discussed below, the

type of plan may affect the types of benefits available for assignment,

how the parties choose to assign the benefits, and other matters.

There are two basic types of qualified plans to which QDROs apply:

defined benefit plans and defined contribution plans.

a. Defined Benefit Plans

A “defined benefit plan” promises to pay each participant a specific

benefit at retirement. The basic retirement benefits are usually based

on a formula that takes into account factors such as the number of years

a participant has worked for the employer and the participant’s salary.

The basic retirement benefits are generally expressed in the form of

periodic payments for the participant’s life beginning at the plan’s

normal retirement age. This stream of periodic payments is generally

known as an “annuity.” There are special rules that apply if the

participant is married; these rules are discussed in greater detail in

section E below. A plan may also provide that these retirement benefits

may be paid in other forms, such as a lump sum payment.

b. Defined Contribution Plans

A “defined contribution plan” is a retirement plan that provides

for an individual account for each participant. The participant’s

benefits are based solely on the amount contributed to the participant’s

account, and any income, expenses, gains and losses, and any forfeitures

of accounts of other participants which may be allocated to such

participant’s account. Examples of defined contribution plans include

a profit sharing plan (including a “401(k)” plan), an employee stock

ownership plan (an “ESOP”) and a money purchase pension plan. Defined

contribution plans commonly permit retirement benefits to be paid in the

form of a lump sum payment of the participant’s entire account balance.

3. Approaches to Dividing Retirement Benefits

There are two common approaches to dividing retirement benefits in

a QDRO: one awards a separate interest in the retirement benefits to the

alternate payee, and the other allows the alternate payee to share in

the payment of the retirement benefits. In drafting a QDRO using either

of these approaches, consideration should be given to factors such as

whether the plan is a defined benefit plan or defined contribution plan,
94 Appendix C

and the purpose of the QDRO (such as whether the QDRO is meant to provide

spousal support or child support, or to divide marital property).

a. Separate Interest Approach

A QDRO that creates a “separate interest” divides the participant’s

benefits into two separate parts: one for the participant and one for

the alternate payee. Subject to the terms of the plan and as discussed

in more detail below, a QDRO may provide that the alternate payee can

determine the form in which his or her benefits are paid and when benefit

payments commence. If benefits are allocated under the separate interest

approach, the drafters of a QDRO should take into account certain issues

depending on the type of plan.

(1) Issues Relevant to Defined Benefit Plans

The treatment of subsidies provided by a plan and the treatment of

future increases in benefits due to increases in the participant’s

compensation, additional years of service, or changes in the plan’s

provisions are among the matters that should be considered when drafting

a QDRO that uses the separate interest approach to allocate benefits

under a defined benefit plan.

Subsidies. Defined benefit plans may promise to pay benefits at

various times and in alternative forms. Benefits paid at certain times

or in certain forms may have a greater actuarial value than the basic

retirement benefits payable at normal retirement age. When one form of

benefit has a greater actuarial value than another form, the difference

in value is often called a subsidy. Plans usually provide that a

participant must meet specific eligibility requirements, such as working

for a minimum number of years for the employer that maintains the plan,

in order to receive the subsidy.

For example, a defined benefit plan may offer an “early retirement

subsidy” to employees who retire before the plan’s normal retirement age

but after having worked for a specific number of years for the employer

maintaining the plan. In some cases, this subsidized benefit provides

payments in the form of an annuity that pays the same annual amount as

would be paid if the payments commenced instead at the normal retirement

age. Because these benefits are not reduced for early commencement,

they have a greater actuarial value than benefits payable at normal

retirement age. This subsidy may be available only for certain forms of

benefit.
Appendix C 95

A QDRO may award to the alternate payee all or part of the

participant’s basic retirement benefits. A QDRO can also address the

disposition of any subsidy to which the participant may become entitled

after the QDRO has been entered.

Future Increases in the Participant’s Benefits. A participant’s

basic retirement benefits may increase due to circumstances that occur

after a QDRO has been entered, such as increases in salary, crediting of

additional years of service, or amendments to the plan’s provisions,

including amendments to provide cost of living adjustments. The treatment

of such benefit increases should be considered when drafting a QDRO

using the separate interest approach.

(2) Issues Relevant to Defined Contribution Plans

Investment of the amount assigned to the alternate payee when the

account is invested in more than one investment vehicle and division of

any future allocation of contributions or forfeitures to the participant’s

account are among the matters that should be considered when drafting a

QDRO that allocates the alternate payee a separate interest under a

defined contribution plan.

Investment Choices. The participant’s account may be invested in

more than one investment fund. If the plan provides for participantdirected investment of the participant’s account, consideration should

be given to how the alternate payee’s interest will be invested.

Future Allocations. A participant’s account balance may later

increase due to the allocation of contributions or forfeitures after the

QDRO has been entered. A QDRO may provide that the amounts assigned to

the alternate payee will include a portion of such future allocations.

b. Shared Payment Approach

A QDRO may use the “shared payment” approach, under which benefit

payments from the plan are split between the participant and the alternate

payee. The alternate payee receives payments under this approach only

when the participant receives payments. A QDRO may provide that the

alternate payee will commence receiving benefit payments when the

participant begins receiving payments or at a later stated date, and

that the alternate payee will cease to share in the benefit payments at

a stated date (or upon a stated event, provided that adequate notice is
96 Appendix C

given to the plan). In splitting the benefit payments, the QDRO may

award the alternate payee either a percentage or a dollar amount of each

of the participant’s benefit payments; in either case, the amount awarded

cannot exceed the amount of each payment to which the participant is

entitled under the plan. If a QDRO awards a percentage of the participant’s

benefit payments (rather than a dollar amount), then, unless the QDRO

provides otherwise, the alternate payee generally will automatically

receive a share of any future subsidy or other increase in the participant’s

benefits.

D. FORM AND COMMENCEMENT OF PAYMENT TO ALTERNATE PAYEE

QDRO drafters should take into account certain issues that may

arise in connection with the alternate payee’s choice of a form of

benefit payments and the date on which payment will commence.

1. Separate Interest Approach

a. Form of Alternate Payee’s Benefit Payments

A QDRO either may specify a particular form in which payments are

to be made to the alternate payee or may provide that the alternate payee

may choose a form of benefit from among the options available to the

participant. However, Federal law provides that the alternate payee

cannot receive payments in the form of a joint and survivor annuity with

respect to the alternate payee and his or her subsequent spouse.

The choice of the form of benefits should take into account the

period over which payments will be made. For example, if the alternate

payee elects to receive a lump sum payment, no further payments will be

made by the plan with respect to the alternate payee’s interest.

Any decision concerning the form of benefit should take into account

the difference, if any, in the actuarial value of different benefit

forms available under the plan. For example, as discussed above, a plan

might provide an early retirement subsidy that is available only for

payment in certain forms.

In addition, the forms of benefit available to the alternate payee

may be limited by § 401(a)(9) of the Code, which specifies the date by

which benefit payments from a qualified plan must commence and limits

the period over which the benefit payments may be made. Section

1.401(a)(9)-1, Q&A H-4, of the Proposed Income Tax Regulations addresses

the application of the required minimum distribution rules of § 401(a)(9)
Appendix C 97

to payments to an alternate payee. The proposed regulation limits the

period over which benefits may be paid with respect to the alternate

payee’s interest. For example, the proposed regulation provides that

distribution of the alternate payee’s separate interest will not satisfy

§ 401(a)(9)(A)(ii) of the Code if the separate interest is distributed

over the joint lives of the alternate payee and a designated beneficiary

(other than the participant).

b. Commencement of Benefit Payments to Alternate Payee

Under the separate interest approach, the alternate payee may

begin receiving benefits at a different time than the participant. A

QDRO either may specify a time at which payments are to commence to the

alternate payee or may provide that the alternate payee can elect a time

when benefits will commence in accordance with the terms of the plan. In

two circumstances, an alternate payee who is given a separate interest

may begin receiving his or her separate benefit before the participant

is eligible to begin receiving payments. First, Federal law provides

that benefit payments to the alternate payee may begin as soon as the

participant attains his or her earliest retirement age. Federal law

defines “earliest retirement age” as the earlier of (i) the date on

which the participant is entitled to a distribution under the plan, or

(ii) the later of (I) the date the participant attains age 50, or (II)

the earliest date on which the participant could begin receiving benefits

under the plan if the participant separated from service. Second, the

retirement plan may (but is not required to) allow payments to begin to

an alternate payee at a date before the earliest retirement date.

2. Shared Payment Approach

As indicated above, under the shared payment approach, benefit

payments are split between the participant and the alternate payee. The

alternate payee receives payments in the same form as the participant.

Further, payments to the alternate payee do not commence before the

participant has begun to receive benefits. Payments to the alternate

payee can cease at any time stated in the QDRO but do not continue after

payments with respect to the participant cease. As noted above, a QDRO

must state the number of payments or the period to which the order

applies.

E. SURVIVOR BENEFITS AND TREATMENT OF FORMER SPOUSE AS

PARTICIPANT’S SPOUSE

Survivor benefits include both benefits payable to surviving spouses

and other benefits that are payable after the participant’s death.

These benefits can be awarded to an alternate payee. In determining the
98 Appendix C

assignment of survivor benefits, QDRO drafters should take into account

that benefits awarded to the alternate payee under a QDRO will not be

available to a subsequent spouse of the participant or to another

beneficiary. QDRO drafters may consult with the plan administrator for

information on the survivor benefits provided under the plan.

A QDRO may provide for treatment of a former spouse of a participant

as the participant’s spouse with respect to all or a portion of the

spousal survivor benefits that must be provided under Federal law. The

following discussion explains the spousal survivor benefits that must be

offered under a plan, and identifies issues that should be considered in

determining whether to treat the alternate payee as the participant’s

spouse.

Only a spouse or former spouse of the participant can be treated as

a spouse under a QDRO. A child or other dependent who is an alternate

payee under a QDRO cannot be treated as the spouse of a participant.

Retirement plans generally need not provide the special survivor

benefits to the participant’s surviving spouse unless the participant is

married for at least one year. If the retirement plan to which the QDRO

relates contains such a one-year marriage requirement, then the QDRO

cannot require that the alternate payee be treated as the participant’s

spouse if the marriage lasted for less than one year.

1. Qualified Joint and Survivor Annuity

Federal law generally requires that defined benefit plans and

certain defined contribution plans pay retirement benefits to participants

who were married on the participant’s annuity starting date (this is the

first day of the first period for which an amount is payable to the

participant) in a special form called a qualified joint and survivor

annuity, or QJSA. Under a QJSA, retirement payments are made monthly

(or at other regular intervals) to the participant for his or her

lifetime; after the participant dies, the plan pays the participant’s

surviving spouse an amount each month (or other regular interval) that

is at least one half of the retirement benefit that was paid to the

participant. At any time that benefits are permitted to commence under

the plan, a QJSA must be offered that commences at the same time and that

has an actuarial value that is at least as great as any other form of

benefit payable under the plan at the same time. A married participant

can choose to receive retirement benefits in a form other than a QJSA if

the participant’s spouse agrees in writing to that choice.
Appendix C 99

2. Qualified Preretirement Survivor Annuity

 Federal law generally requires that defined benefit plans and

certain defined contribution plans pay a monthly survivor benefit to a

surviving spouse for the spouse’s life when a married participant dies

prior to the participant’s annuity starting date, to the extent the

participant’s benefit is nonforfeitable under the terms of the plan at

the time of his or her death. This benefit is called a qualified

preretirement survivor annuity, or QPSA. As a general rule, an individual

loses the right to the QPSA survivor benefits when he or she is divorced

from the participant. However, if a former spouse is treated as the

participant’s surviving spouse under a QDRO, the former spouse is eligible

to receive the QPSA unless the former spouse consents to the waiver of

the QPSA. If the spouse does not waive the QPSA, the plan may allow the

spouse to receive the value of the QPSA in a form other than an annuity.

3. Defined Contribution Plans Not Subject to the QJSA or QPSA

Requirements

Those defined contribution plans that are not required to pay

benefits to married participants in the form of a QJSA or a QPSA are

required by Federal law to pay the balance remaining in the participant’s

account after the participant dies to the participant’s surviving spouse.

If the spouse gives written consent, the participant can direct that

upon his or her death the account will be paid to a beneficiary other

than the spouse, for example, the couple’s children.

4. Alternate Payee Treated as Spouse

A QDRO may provide that an alternate payee who is a former spouse

of the participant will be treated as the participant’s spouse for some

or all of the benefits payable upon the participant’s death, so that the

alternate payee will receive benefits provided to a spouse under the

plan. To the extent that a former spouse is to be treated under the plan

as the participant’s spouse pursuant to a QDRO, any subsequent spouse of

the participant cannot be treated as the participant’s surviving spouse.

Thus, QDRO drafters should consider the potential impact of designating

a former spouse as the participant’s spouse on the disposition of survivor

benefits among the former spouse and any subsequent spouse of the

participant, as well as the impact on children or any other beneficiaries

designated by the participant in accordance with the terms of the plan.
100 Appendix C

In determining the portion of the participant’s benefits for which

the alternate payee is treated as the spouse, the drafters should take

into account the manner in which benefits are otherwise divided under

the QDRO. In particular, consideration should be given to whether the

formula for dividing the participant’s benefits for this purpose should

be coordinated with the formula otherwise used for dividing the benefits.

Under a defined benefit plan, or a defined contribution plan that

is subject to the QJSA and QPSA requirements, to the extent the former

spouse is treated as the current spouse, the former spouse must consent

to payment of retirement benefits in a form other than a QJSA or to the

participant’s waiver of the QPSA. For example, in a defined benefit

plan, the participant would not be able to elect to receive a lump sum

payment of the retirement benefits for which the alternate payee is

treated as the participant’s spouse unless the alternate payee consents.

Similarly, the former spouse’s consent might be required for any loan to

the participant from the plan that is secured by his or her retirement

benefits. In a defined contribution plan that is not subject to the QJSA

and QPSA requirements, to the extent the QDRO treats the former spouse

as the participant’s spouse under the plan, the survivor benefits under

the plan must be paid to the former spouse unless he or she consents to

have those benefits paid to someone else.

F. TAX TREATMENT OF BENEFIT PAYMENTS MADE PURSUANT TO A QDRO

The Federal income tax treatment of retirement benefits is governed

by Federal law, and a QDRO cannot designate who will be liable for the

taxes owed when retirement benefits are paid. For a description of the

tax consequences of payments to an alternate payee pursuant to a QDRO,

see Internal Revenue Service Publication 575, Pension and Annuity Income.

A local IRS office can provide this publication, or it may be obtained by

calling 1-800-TAX-FORM.

PART II. SAMPLE LANGUAGE FOR INCLUSION IN QDRO

A. SAMPLE LANGUAGE FOR IDENTIFICATION OF PARTICIPANT AND

ALTERNATE PAYEE

The “Participant” is [insert name of Participant]. The Participant’s

address is [insert Participant’s address]. The Participant’s social

security number is [insert Participant’s social security number].
Appendix C

The “Alternate Payee” is [insert name of Alternate Payee]. The

Alternate Payee’s address is [insert Alternate Payee’s address]. The

Alternate Payee’s social security number is [insert Alternate Payee’s

social security number]. The Alternate Payee is the [describe the

Alternate Payee’s relationship to Participant] of the Participant.

B. SAMPLE LANGUAGE FOR IDENTIFICATION OF RETIREMENT PLAN

This order applies to benefits under the [insert formal name of

retirement plan] (“Plan”).

C. AMOUNT OF BENEFITS TO BE PAID TO ALTERNATE PAYEE

Instruction: The QDRO should clearly specify the amount or

percentage of benefits assigned to the Alternate Payee or the

manner in which the amount or percentage is to be determined,

and the number of payments or period to which the Order applies.

There are many different forms in which benefits may be paid

from a qualified plan. Because of the diversity of factors

that should be considered, and the need to tailor the assignment

of benefits under a QDRO to meet the needs of the parties

involved, specific sample language regarding the assignment of

benefits has not been provided. See the discussion in Part I

for further information.

D . SAMPLE LANGUAGE FOR FORM AND COMMENCEMENT OF PAYMENT TO

ALTERNATE PAYEE

Instruction: Drafters using the separate interest approach may

use paragraph 1. Drafters using the shared payment approach may

use paragraph 2. Drafters using the separate interest approach

for a portion of the benefits allocated to the alternate payee

and the shared payment approach for the remainder should modify

the sample language to specify the benefits to which each paragraph

provided below applies.

1. Separate Interest Approach

The Alternate Payee may elect to receive payment from the Plan of

the benefits assigned to the Alternate Payee under this Order in any

form in which such benefits may be paid under the Plan to the Participant

(other than in the form of a joint and survivor annuity with respect to

the Alternate Payee and his or her subsequent spouse), but only if the

form elected complies with the minimum distribution requirements of §

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Appendix C

401(a)(9) of the Internal Revenue Code. Payments to the Alternate Payee

pursuant to this Order shall commence on any date elected by the Alternate

Payee (and such election shall be made in accordance with the terms of

the Plan), but not earlier than the Participant’s earliest retirement

age (or such earlier date as allowed under the terms of the Plan), and

not later than the earlier of (A) the date the Participant would be

required to commence benefits under the terms of the Plan or (B) the

latest date permitted by § 401(a)(9) of the Internal Revenue Code. For

purposes of this Order, the Participant’s earliest retirement age shall

be the earlier of (i) the date on which the participant is entitled to a

distribution under the Plan, or (ii) the later of (I) the date the

Participant attains age 50, or (II) the earliest date on which the

Participant could begin receiving benefits under the plan if the Participant

separated from service.

2. Shared Payment Approach

The Alternate Payee shall receive payments from the Plan of the

benefits assigned to the Alternate Payee under this Order (including

payments attributable to the period in which the issue of whether this

Order is a qualified domestic relations order is being determined)

commencing as soon as practicable after this Order has been determined

to be a qualified domestic relations order or, if later, on the date the

Participant commences receiving benefit payments from the Plan. Payment

to the Alternate Payee shall cease on the earlier of: [insert date or

future event, such as the Alternate Payee’s remarriage], or the date

that payments from the Plan with respect to the Participant cease.

E. SAMPLE LANGUAGE FOR TREATMENT OF FORMER SPOUSE AS

PARTICIPANT’S SPOUSE

Instruction: The Alternate Payee may be treated as the

Participant’s spouse only if the Alternate Payee is the

Participant’s spouse or former spouse, and not if the Alternate

Payee is a child or other dependent of the Participant.

If the Alternate Payee is the Participant’s spouse or former

spouse, drafters may select sample paragraph 1, sample paragraph

2, or sample paragraph 3. Sample paragraph 1 applies if the

Alternate Payee is treated as the Participant’s spouse for all

of the spousal survivor benefits payable with respect to the

Participant’s benefits under the Plan. Sample paragraph 2

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Appendix C 103

applies if the Alternate Payee is treated as the Participant’s

spouse for a portion of the spousal survivor benefits payable

with respect to the Participant’s benefits under the Plan.

Sample paragraph 3 applies if the Alternate Payee is not treated

as the Participant’s spouse for any of the spousal survivor

benefits payable with respect to the Participant’s benefits

under the Plan.

1. Alternate Payee Treated as Spouse For All Spousal Survivor Benefits

The Alternate Payee shall be treated as the Participant’s spouse

under the Plan for purposes of §§ 401(a)(11) and 417 of the Code.

2. Alternate Payee Treated as Spouse For a Portion of the Spousal

Survivor Benefits

The Alternate Payee shall be treated as the Participant’s spouse

under the Plan for purposes of §§ 401(a)(11) and 417 of the Code with

respect to [insert percentage of benefit or a formula, such as a formula

describing the benefit earned under the plan during marriage].

3. Alternate Payee not Treated as Spouse

The Alternate Payee shall not be treated as the Participant’s

spouse under the Plan.
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