Retirement Solutions Qualified Domestic Relations Order (QDRO) Employer s Administrative Manual This manual was prepared to assist in the processing of Qualified Domestic Relations Orders. The information contained herein is intended as a resource for use with Lincoln sponsored IRS-approved prototype plan documents, as well as with the individually designed defined contribution plans of our clients. IRS Circular 230 Disclosure Any discussion pertaining to taxes in this communication (including attachments) may be part of the promotion or marketing as a product. Lincoln Financial Group affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Any tax statements contained herein (including attachments) were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state or local tax penalties. Individuals should consult their own independent advisor as to any tax, accounting or legal statements made herein. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.
Table of contents Qualified Domestic Relations Order employer s administrative manual What is a QDRO?........................................................... 3 What plans are subject to the QDRO rules?........................................ 3 What happens if an incorrect determination is made?................................ 3 What role does a service provider play in QDRO determinations?....................... 3 What must be done upon receipt of a state domestic relations order?................... 4 How does one use the Model QDRO?............................................ 4 Can the Alternate Payee be restricted to any particular form of distribution?.............. 4 What rights can a QDRO give the Alternate Payee?.................................. 4 When can a plan force the Alternate Payee to take a cash lump sum?................... 4 Will a divorce attorney be involved?............................................. 5 Should an employer consult its own attorney about an order?......................... 5 How quickly does a determination regarding the validity of the QDRO need to be made?............................................... 5 Should a participant be permitted to withdraw money if the plan administrator knows that an order is forthcoming, or has received an order, but not made a determination yet?...... 5 What is the Date of Segregation?............................................. 5 Can the employer charge the participant or Alternate Payee for the attorney s fees incurred?.. 6 Who can be named an Alternate Payee under a QDRO?.............................. 6 What are the tax consequences of a QDRO distribution?.............................. 6 Qualified Domestic Relations Order Procedures................................... 7 Qualified Domestic Relations Order Checklist..................................... 9 Qualified Domestic Relations Order sample letters Acknowledgement letter to Participant.......................................... 11 Acceptance letter.......................................................... 12 Notice to Service Provider(s) of Freeze on Plan Account.............................. 13 Rejection letter............................................................ 14 Sample Qualified Domestic Relations Order Form................................. 15
Employer s administrative manual 1. What is a QDRO? This Qualified Domestic Relations Order Employer s Administrative Manual ( Manual ) has been developed to help plan administrators in the determination and administration of Qualified Domestic Relations Orders. Section 206(d)(1) of the Employee Retirement Income Security Act of 1974, as amended, ( ERISA ), and Section 401(a)(13) of the Internal Revenue Code of 1986, as amended (the Code ), both prohibit the assignment or alienation of a participant s benefits under a qualified plan. Because ERISA preempts most state laws, a state domestic relations order ( Order ) that seeks to create or recognize the existence of an Alternate Payee s right to receive part or all of a plan participant s benefits cannot be honored by a qualified plan. However, in 1984 the Retirement Equity Act ( REA ) established an exception to the anti-assignment provision for qualified state domestic relations orders, or QDROs. Sections 206(d)(3) of ERISA and 414(p) of the Code outline the conditions that an Order must meet to qualify as a QDRO. 2. What plans are subject to the QDRO rules? The degree of applicability of the QDRO rules under IRC 414(p) and ERISA 206(d) varies among different types of retirement plans. Profit Sharing, Money Purchase and 401(k) Salary Reduction, 403(b) plans, church and government plans are generally subject to the rules outlined in this procedure. Note: QDRO rules do not apply to Individual Retirement Accounts ( IRAs ). These procedures are intended to meet the requirements of 414(p) and ERISA 206(d). They have been developed to assist plan administrators who are required or have elected to comply with these rules. 3. What happens if an incorrect determination is made? The plan administrator, as defined under the Internal Revenue Code and ERISA, has a fiduciary duty to make sure that Orders are properly processed. If a valid QDRO is not honored, or if an invalid Order is honored, the plan administrator could face liability in connection with the faulty determination. 4. What role does a service provider play in QDRO determinations? Under the service agreement the service provider, generally known as the record keeper, is not the plan administrator. The service provider may perform certain administrative functions for the plan. Although the plan administrator has the ultimate responsibility for the proper administration of QDROs, the service provider s job as record keeper is to assist the plan administrator in fulfilling its various duties. This Manual, the enclosed Qualified Domestic Relations Order Procedures and Qualified Domestic Relations Order Checklist, and the enclosed sample Qualified Domestic Relations Order Form are intended for use in helping plan administrators to comply with the QDRO rules. Although the service provider may provide a client with guidance on various QDRO issues, the plan administrator has ultimate responsibility for complying with these rules. The service provider merely makes recommendations to the plan administrator on various issues, but does not actually decide each issue. Neither the plan administrator nor the service provider have any obligation to determine the validity of the underlying Order, i.e., whether the state court or other state agency issuing the Order has proper jurisdiction over the matter, whether state law is correctly applied to the Order, or other issues of state domestic relations law. However, if the plan administrator is aware of facts indicating that the Order is invalid (e.g., that the divorce is a sham or the proposed recipient of plan benefits does not qualify as an Alternate Payee (see Question 16), the plan administrator has a fiduciary duty under ERISA to consider, and where appropriate, to investigate those facts. 3
5. What must be done upon receipt of a state domestic relations order? The enclosed Procedures outline each step that must be taken by the plan administrator or its delegate as soon as an Order is received. The Checklist outlines the requirements that the Order must meet to qualify as a valid QDRO. Attached to the Checklist are sample letters that may be sent to the plan participant and Alternate Payee (usually the ex-spouse of the participant) upon receipt of the Order and again when a decision regarding the status of the Order is made. 6. How does one use the Model QDRO? As directed in the Procedures, the Model QDRO should be given to any plan participant or Alternate Payee (or their authorized representatives) who inquires about QDROs and QDRO procedures. Proper use of the Model Form will reduce errors in drafting QDROs, and reduce the time it will take the plan administrator and/or service provider to review the Order. 7. Can the Alternate Payee be restricted to any particular form of distribution? The Alternate Payees may often prefer to have their benefits distributed to them as soon as possible in the form of an immediate cash lump sum, which generally may be rolled over into an IRA or another employersponsored retirement plan if the Alternate Payee is the spouse or former spouse of the participant. However, the Alternate Payee is entitled to have his or her benefit paid in any of the forms that would otherwise be available to the plan participant. Therefore, the Model QDRO allows the Alternate Payee to choose any of the forms currently available under the plan. Plan administrators are required to honor any Order that satisfies the conditions to be a QDRO. In the view of the Department of Labor ( DOL ), the plan may not condition its determinations of QDRO status on the use of any particular form of distribution. The Model QDRO clearly offers the Alternate Payee the option of an immediate cash lump sum distribution. If this form is chosen, a separate account will not need to be set up with respect to the Alternate Payee. If the QDRO does not provide for a lump sum distribution but requests that a separate account be established, the Alternate Payee is provided the appropriate paperwork to establish his or her paid-up account. 8. What rights can a QDRO give the Alternate Payee? A QDRO gives the Alternate Payee the same rights as the participant with respect to the election of optional forms of benefits and other plan features. However, in no event may the Alternate Payee be given more rights than the participant has, or require the plan to provide any type or form of benefit, or any option, not otherwise provided under the plan. A QDRO may not award the Alternate Payee more than the value of the participant s vested account balance as of the Date of Segregation (see definition for Date of Segregation in Question 14). Under the QDRO rules, subject to certain exceptions, the participant and Alternate Payee have the right to demand that a separate account be established for the Alternate Payee. Once the separate account is established, the Alternate Payee has most of the same rights that a regular participant has, such as the right to direct investments and to receive annual reports. In addition, if the Alternate Payee is the spouse or former spouse of the participant, the Alternate Payee may roll over eligible distributions to eligible retirement plans, just as a participant may. 9. When can a plan force the Alternate Payee to take a cash lump sum? Just as in the case of any terminated participant, the plan can force an Alternate Payee to take an immediate cash lump sum distribution if the amount of the Alternate Payee s benefit on the Date of Segregation (see Question 14) is $5,000 or less. 4
10. Will a divorce attorney be involved? In many, if not most, cases, one or both of the participant and the Alternate Payee will be represented by an attorney. This attorney may submit an Order in a form other than the Model QDRO. This may complicate the plan administrator s processing of the Order, if it does not initially meet the requirements to be a QDRO. If this occurs, the plan administrator may need to advise the attorney to revise and resubmit the Order. By encouraging the use of the Model QDRO, the plan administrator can reduce the time and effort spent processing Orders, as attorneys will find the Model QDRO easy to use, and this Manual will help answer any questions posed by attorneys. If you know that the participant and/or Alternate Payee are represented by an attorney, you should copy the attorney(s) on all correspondence. 11. Should an employer consult its own attorney about an order? While the determination of a valid QDRO is usually a simple matter, especially if the Model QDRO, Procedures and Checklist are used, you should always consult with an attorney if any questions arise in connection with the processing of an Order. Also, because you are relying on the validity of the Model QDRO in many cases, you should ask an attorney to review the Model QDRO from time to time to ensure continuing compliance with the law. 12. How quickly does a determination regarding the validity of the QDRO need to be made? A Plan Administrator must determine whether an Order is a valid QDRO within a reasonable period following receipt of the Order. The definition of reasonable period of time will depend on the facts and circumstances. For example, an Order that is simple and clearly complete when submitted should take less time to review than one which is incomplete or unclear. 13. Should a participant be permitted to withdraw money if the Plan Administrator knows that an order is forthcoming, or has received an order, but not made a determination yet? During the period following receipt of the Order, in which the Order s validity is being determined, 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, if the Order turns out to be a valid QDRO. These amounts are referred to as segregated amounts. During the period in which the status of the Order is being determined, the plan administrator must take steps to ensure that such segregated amounts are NOT distributed to the participant or any other person. This may result in the plan administrator being subject to conflicting claims if the participant requests a distribution during this period. The plan administrator can reduce the possibility of such conflicts by having procedures in place that ensure prompt correction of defective Orders and processing of valid QDROs, thereby keeping the review period as short as possible. 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 that begins on the first date (after the plan receives the Order) that the Order would require payment to be made to the Alternate Payee. It is the DOL s position that, in order to ensure the availability of the full 18-month protection period, that the 18-month period cannot begin before the plan administrator receives the Order. 5
14. What is the Date of Segregation? The Order must specify the date as of which the amount of benefit to be paid to the Alternate Payee shall be determined (e.g., date of the couple s separation, date of divorce, date of Order). This is referred to as the Date of Segregation. For example, the Plan Administrator receives an Order on May 1, 2008. The Order specifies that the Alternate Payee is to receive 50% of the participant s account balance as of July 25, 2006 (the date of the couple s separation). Therefore July 25, 2006, is the Date of Segregation. 15. Can the employer charge the participant or Alternate Payee for the attorney s fees incurred? Generally yes. The DOL permits the Plan Administrator to charge the account of a Participant or Alternate Payee for the reasonable costs associated with administering the QDRO, including attorney s fees that are allocable to the QDRO determination. Note: the Plan document must allow for such expenses to be paid with plan assets. An attorney or other qualified professional should be consulted before making any such charges against the account(s). 16. Who can be named an Alternate Payee under a QDRO? The recipient of a QDRO, or Alternate Payee, can be a spouse, former spouse, child or other dependent of a participant. Generally, the Alternate Payee would be the former spouse. This Manual often assumes, for the sake of example, that the Alternate Payee is a spouse or former spouse. However, it is becoming more common to have Orders for child support. Such Orders may specify that payment be made to the court, since child support payments are usually sent through the court system. 17. What are the tax consequences of a QDRO distribution? Under federal income tax law, an Alternate Payee who is the spouse or former spouse of the participant is responsible for payment of any federal income taxes on any QDRO distribution that is not rolled over to a qualified plan or individual retirement account. An Alternate Payee that is the participant's spouse or former spouse has rollover rights equivalent to those of the participant. The participant is generally responsible for payment of any federal income taxes on a QDRO distribution to a non-spouse Alternate Payee. A nonspouse Alternate Payee is not permitted to make a rollover. If the Alternate Payee is the spouse or former spouse, he or she may defer taxes by rolling over his or her QDRO distribution. This may be done by electing a direct rollover, instructing that payment be made directly from the plan to an IRA or other qualified plan. Alternatively, the Alternate Payee may elect to have payment made directly to him or her. If this election is made, the QDRO distribution is subject to the 20% withholding rule. The QDRO distribution may still be rolled over if the rollover is made within 60 days after receipt by the Alternate Payee. The 20% that was withheld will not be included in the rollover (and will instead be included in taxable income) unless the Alternate Payee pays this amount into the IRA or plan out of other funds. A distribution to either a spouse or non-spouse Alternate Payee pursuant to a QDRO is not subject to the 10% penalty tax otherwise imposed on early withdrawals from qualified retirement plans. The rules regarding the taxation of retirement plan distributions and rollovers are complicated. The Alternate Payee should be encouraged to obtain individual tax advice from an attorney or other qualified professional that takes into consideration their specific circumstances. 6
Qualified Domestic Relations Order Procedures The following Procedures have been established in accordance with the applicable provisions of the Internal Revenue Code of 1986, as amended (the Code ), and the Employee Retirement Income Security Act of 1974, as amended ( ERISA ). These Procedures should be followed upon receipt of an Order. I. Notice of Receipt Acknowledgement Letter The plan administrator or its delegate will promptly notify the participant and Alternate Payee in writing of the plan s receipt of the Order and that the Order will be reviewed to determine if the Order meets the QDRO requirements of the Code and ERISA. If the Order fails to meet all of the QDRO requirements, the parties shall be notified of the defect, an explanation of the defect and the revision needed to correct the defect before the Order is resubmitted for a determination. Once the revised Order is returned, an acknowledgement letter is sent to the participant and the Alternate Payee informing the parties that his or her account is subject to the Order and the account will remain frozen until the Order is processed and the account is segregated. A sample acknowledgment letter is included following the Checklist. (The Alternate Payee and participant may each designate a representative for receipt of copies of all correspondence sent to them with respect to the Order by writing to the Plan Administrator, or its designee. The name and address of the Plan Administrator, or its delegate, should be indicated in the Acknowledgement Letter.) II. Segregation of Amounts When the Order is received, the Plan Administrator must separately account for the amount specified in the Order, and shall distribute such segregated amounts only as described below. Upon receipt of the Order, the Plan Administrator shall prohibit distributions, withdrawals, or loans from the segregated amount during the period that the qualified status of the Order is being determined. III. Determination of Order Within a reasonable period of time after receiving the domestic relations order (recommended: thirty (30) days), the Plan Administrator will determine if such order is a Qualified Domestic Relations Order and will notify the participant and Alternate Payee in writing of the results. The Checklist should be used for determining whether the Order meets all of the requirements of a valid QDRO. Sample Acceptance and Rejection Letters are included following the Checklist. A notification that the Order fails to qualify should contain the reasons for rejecting the Order, and a description of any revisions necessary to qualify the Order. IV. Orders Determined to be Qualified A QDRO must be entered by the court and a true-copy of the QDRO containing the judge s signature must be submitted to the plan administrator for final approval and processing. If the determination is made within the 18-month period beginning with the date on which the first payment to the Alternate Payee would be required to be made under the Order, the plan administrator shall distribute the segregated amount (including any earnings and/or interest thereon) to the Alternate Payee in accordance with the terms of the QDRO. 7
Amounts due to the Alternate Payee will be held in the plan until the earliest date payable under the QDRO, unless the Alternate Payee is permitted to elect a lump sum distribution. If the Alternate Payee elects to defer receipt of the benefit awarded to him or her under the Order, the plan administrator shall establish a separate account for the Alternate Payee. Unless the QDRO specifies otherwise, the Alternate Payee s account shall consist of the amount awarded to him or her under the QDRO taken on a pro rata basis from all the investment funds in which the participant is currently invested. The Alternate Payee s account will initially be invested in the plan s default investment option. The Alternate Payee will be sent notice that a separate account has been established and that the Alternate Payee may change his or her investment allocations among the various funds offered under the plan as often, and subject to the same conditions, as the participant. V. Orders Determined Not to Qualify If the Plan Administrator determines that the Order is not qualified, the plan administrator must continue to maintain and protect the Alternate Payee s portion of the participant s account as it is likely that the Order will be revised and resubmitted to the plan administrator for further review. If, at the end of the 18-month period beginning with the date on which the first payment to the Alternate Payee would have been required to be distributed under the Order, it is determined that the Order is not a valid QDRO, or the status of the Order is still unresolved, the plan administrator shall remove the restriction from the participant s account thereby causing the portion awarded to the Alternate Payee to revert back to the participant. VI. Adoption of Procedures by Plan By signing below, you, the plan administrator, certify that you adopt these Procedures effective on the day and year specified. Plan Administrator s name (print) Plan Administrator s signature Date 8
Qualified Domestic Relations Order Checklist Domestic Relations Order Inquiry Upon receipt of a State Domestic Relations Order Inquiry, the Plan Administrator, or its delegate, should: Send the individual making the inquiry the following: a copy of the Qualified Domestic Relations Order Procedures, the Qualified Domestic Relations Order Checklist, and the Sample Qualified Domestic Relations Order. NO other action should be taken upon the mere promise, rumor, threat, etc., that an Order will be forthcoming! Completion date / / (mm/dd/year) Domestic Relations Order Received Send a letter acknowledging that the Order has been received to the participant and the Alternate Payee, or their authorized representatives, if so instructed. Sample acknowledgement letters are attached following this Checklist. Completion date / / (mm/dd/year) Send a written notification to the relevant plan(s) service provider(s) implementing a freeze on that portion of the participant s account that would be transferred to the Alternate Payee if the Order is determined to be a valid QDRO. Specify whether the freeze applies to distributions, investment transfers, plan loans and/or hardship withdrawals, if applicable. The participant should also be notified if a freeze is implemented. See sample letters following this Checklist. Completion date / / (mm/dd/year) Check Order to ensure that the following requirements are met: Order must be a judgment, decree, or order, including approval of a property settlement, that 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 must be made pursuant to an applicable state domestic relations law; Order must create or recognize the existence of the right of an Alternate Payee to receive all or a portion of the retirement benefits payable with respect to the Participant; Order must state the name of the Participant; (The date of birth, social security and address of participant are optional.) Provide only the last 4 digits of the social security number.* Order must state the name and current address of the Alternate Payee; (The date of birth and social security number are optional.) Provide only the last 4 digits of the social security number.* *Pursuant to the Privacy Act, the social security numbers must be provided under separate cover. 9
Order must specify the name of each of the retirement plans to which the Order relates; Order must clearly specify the amount or percentage of the participant s benefit to be paid to the Alternate Payee, or the manner in which such amount is to be determined. Note: the Order must not require the payment of benefits in excess of the participant s available (read: vested) benefit under the plan. In addition, the amount of the participant s available account balance must be reduced by the amount of any outstanding loans; Order should clearly specify the date as of which the amount of benefit to be paid to the Alternate Payee shall be determined (e.g., date of separation, date of divorce, date of Order, etc.). This is the Date of Segregation; and Order may not grant the payment of benefits to the Alternate Payee which are required to be paid to another individual under a previously received valid QDRO. Completion date / / (mm/dd/year) After Determination If the Order has been approved, send the Domestic Relations Order Acceptance letter. If the Order has not been approved, send the Domestic Relations Order Rejection letter, indicating the reason(s) for the rejection and describing the revisions necessary to qualify the Order. Sample Acceptance and Rejection letters are attached following this Checklist. Completion date / / (mm/dd/year) If the Order has been approved, and a separate account has been established for the Alternate Payee, the Plan Administrator must ask the Alternate Payee to provide his/her investment elections, and must inform the Alternate Payee that the Alternate Payee s account will be invested in the plan s default investment option in the absence of such election. Completion date / / (mm/dd/year) 10
Acknowledgement Letter to Participant (Note: A copy of the Acknowledgement Letter should be sent to the Alternate Payee or the participant s and the Alternate Payee s representatives if one has been appointed) SAMPLE [Date] [Name of Participant] [Address] [City, State, Zip] Re: Receipt of State Domestic Relations Order relating to [Name of relevant plan(s)] Dear [Name of Participant]: We have received a state domestic relations order ( Order ) with respect to the above-referenced plan(s), affecting your account. We are in the process of reviewing the order as described in the enclosed review procedures as to whether or not the Order qualifies as a Qualified Domestic Relations Order ( QDRO ) pursuant to the relevant section 414(p) of the Internal Revenue Code of 1986, as amended (the Code ), [and the Employee Retirement Income Security Act of 1974, as amended ( ERISA )]*. We have enclosed a copy of the Qualified Domestic Relations Order Procedures, the Qualified Domestic Relations Order Checklist and a model Qualified Domestic Relations Order for your reference. Upon review of the QDRO, if the Order is determined to be a valid QDRO, all or some portion of your account will be transferred to [Name of Alternate Payee], the Alternate Payee. Enclosed with this letter is a copy of the Order. Effective immediately, your account shall be frozen, and you will not be permitted to take a distribution, a hardship withdrawal or a plan loan until your account is segregated. However, you may continue to make deposits into your account while the freeze is in effect. If you have any questions, please contact us at (999-999-9999). You or the Alternate Payee may also appoint a representative, usually your lawyer, to receive further correspondence regarding the qualified nature of the Order. To do so, please inform the Plan Administrator in writing at the above address, the Lincoln Processing Agent, and the Lincoln Customer Contact Center of your desire to appoint such a representative. Sincerely, [Name of Plan Administrator] cc: Alternate Payee Representatives for participant and Alternate Payee if one has been appointed Enclosures: Qualified Domestic Relations Order Procedures Qualified Domestic Relations Order Checklist Sample Qualified Domestic Relations Order *Please include reference to ERISA only when processing a QDRO for an ERISA plan. 11
Acceptance Letter (Note: A copy of the Acceptance Letter should be sent to the Alternate Payee or the participant s and Alternate Payee s Representatives) SAMPLE [Date] [Name of Participant] [Address] [City, State, Zip] Re: Receipt of State Domestic Relations Order relating to [Name of relevant plan(s)] Dear [Name of Participant]: We have reviewed the state domestic relations order ( Order ) made with respect to the above-referenced plan, affecting the account of the participant, [Name of participant]. We have determined that the order qualifies as a Qualified Domestic Relations Order pursuant to section 414(p) of the Internal Revenue Code of 1986, as amended (the Code ), [and the Employee Retirement Income Security Act of 1974, as amended ( ERISA )]*. [Name of Alternate Payee], the Alternate Payee, will be receiving distribution request forms from the plan if a distribution is permitted or will be receiving enrollment information. The freeze will be removed immediately from your account once your account is segregated. If you have any questions, please contact us at (999-999-9999). Sincerely, [Name of Plan Administrator] cc: Alternate Payee Representatives for participant and Alternate Payee if one has been appointed Service Provider *Please include reference to ERISA only when processing a QDRO for an ERISA plan. 12
Notice to Service Provider(s) of Freeze on Plan Account SAMPLE [Date] [Name of Service Provider(s)] [Address] [City, State, Zip] Re: Receipt of State Domestic Relations Order relating to [Name of relevant plan(s)] and [Name of Relevant Participant Account] Dear [Service Provider]: We have received a state domestic relations order ( Order ) with respect to the above-referenced plan(s), affecting the account(s) of the participant, [Name of participant]. We are in the process of determining whether the order qualifies as a Qualified Domestic Relations Order (a QDRO ) pursuant to the relevant sections of the Internal Revenue Code of 1986, as amended (the Code ), and the Employee Retirement Income Security Act of 1974, as amended ( ERISA )*. Effective immediately, and until you receive further instructions from us, [describe the portion of the participant s account affected by the Order] shall be frozen. While the freeze is in effect, the participant shall not be permitted to take a distribution, hardship withdrawal, or plan loan from the plan with respect to the portion of the participant's account that would belong to the Alternate Payee if the Order is determined to be a valid QDRO. The participant is permitted to continue to make deposits into his/her account while the freeze is in effect. If you have any questions, please contact us at (999-999-9999). Sincerely, [Name of Plan Administrator] Enclosure: Domestic Relations Order *Please include reference to ERISA only when processing a QDRO for an ERISA plan. 13
Rejection Letter (Note: A copy of the Rejection Letter should be sent to the Alternate Payee or the participant s and Alternate Payee s Representatives) SAMPLE [Date] [Name of Participant] [Address] [City, State, Zip] Re: Determination regarding State Domestic Relations Order relating to [Name of relevant plan(s)] and the Account of [Name of Participant] Dear [Participant]: We have reviewed the state domestic relations order ( Order ) sent to us in regards to the above-referenced plan(s). The Order fails to meet the applicable requirements of section 414(p) of the Internal Revenue Code of 1986, as amended (the Code ), [and the Employee Retirement Income Security Act of 1974, as amended ( ERISA )*], or may not be honored for the following reason(s): (Check all applicable reasons.) The name and last known mailing address of the participant (if any) and the name and last known mailing address of each Alternate Payee covered by the Order was not specified. Please note that missing participant name and address does not disqualify an Order. This information is optional. The amount or percentage of the participant s benefits to be paid to the Alternate Payee, or the manner in which such amount or percentage is to be determined was not specified. The number of payments or period to which such order applies. The plan(s) to which the order applies was not specified. The order requires the plan to provide a type or form of benefit or option not otherwise covered under the plan, increased benefits or payment of benefits to another Alternate Payee which are required to be paid to an Alternate Payee under a previous QDRO. We have enclosed a copy of the Qualified Domestic Relations Order Procedures, the Qualified Domestic Relations Order Checklist and a model Qualified Domestic Relations Order for your reference in preparation of your revised Order. If you wish, you may submit your revised Order to us for review prior to resubmitting the revised Order to the court so that any other problems can be resolved in advance. If you have any questions, please contact us at (999-999-9999). Sincerely, [Name of Plan Administrator] cc: Alternate Payee Representatives for participant and Alternate Payee if one has been appointed Enclosures: Qualified Domestic Relations Order Procedures Qualified Domestic Relations Order Checklist Sample Qualified Domestic Relations Order *Please include reference to ERISA only when processing a QDRO for an ERISA plan. 14
Qualified Domestic Relations Order Form Note: This model form is for reference purposes only SAMPLE STATE OF ) IN THE COURT ) SS: COUNTY OF ) CAUSE NO. IN RE: THE MARRIAGE OF ) ) ) ) AND, ) ), PETITIONER) QUALIFIED DOMESTIC RELATIONS ORDER The parties intend that this agreement, when approved by the Court with appropriate jurisdiction over the parties and the matter and the Plan Administrator (defined below), shall constitute a Qualified Domestic Relations Order ( QDRO ) as established and defined by Section 414(p) of the Internal Revenue Code of 1986 and Section 206(d)(3) of the Employee Retirement Income Security Act of 1974 ( ERISA ). (a) This Order shall apply to the ( Plan ) in which is the Participant. (b shall be the Alternate Payee under this Order, as defined in Section 414(p)(8) of the Code and Section 206(d)(3)(K) of ERISA. (c) The parties hereby create and/or recognize the Alternate Payee s right to receive all or a portion of the benefits payable under the Plan to the Participant, as provided for herein. (d) This Order relates to the provision of marital property rights to a spouse or other dependent of the Participant and is made pursuant to the applicable state domestic relation law. (e) The following information relates to the Participant: Name: Soc. Sec. No.: (Last 4 digits only. Pursuant to the Privacy Act, the social security number is to be provided under separate cover) Date of birth: / / Current address: 15
(f) The following information relates to the Alternate Payee: Name: Soc. Sec. No.: (Last 4 digits only. Pursuant to the Privacy Act, the social security number is to be provided under separate cover) Date of birth: / / Current address: (g) The Plan Administrator of the Plan, shall transfer to the Alternate Payee the sum of (choose one): Dollars % of the Participant s vested account balance (as of the most recent valuation period or as of a specified date). Payment to the Alternate Payee shall be made in any of the forms, if provided for by the Plan document (choose one): An immediate cash lump sum distribution, as soon as administratively possible after the Plan Administrator approves the Order (Plan document must permit). Any other form of distribution allowed under the Plan. The Alternate Payee may also choose to defer receipt of his/her payment (describe form and timing of desired distribution here): (h) The distribution described in paragraph (g) above shall shall not (check one) be adjusted by earnings or losses allocable to the account as of (last valuation date or specific date). (i) The parties stipulate that any judgment, decree, or order approving or incorporating the provisions of this Order (1) do not require the plan to provide increased benefits (determined on the basis of actuarial value), and (2) do not require the payment of benefits to the Alternate Payee which are required to be paid to any other Alternate Payee under any other order previously determined to be a QDRO. (j) The Court approving this Order shall retain jurisdiction to amend this Order, but only for the purpose of establishing or maintaining its qualifications as a QDRO under the Retirement Equity Act, provided that no such amendment shall require the Plan to provide any type or form of benefit, or any option, not otherwise provided for under said Plan, and further provided that no such amendment or the right of the Court to so amend will invalidate this Order as qualified under said Act. (k) A copy of this Order shall be delivered to the Plan Administrator at the address identified below. Upon approval by the Plan Administrator, this Order shall take effect immediately and remain in effect until further order of the Court or until it expires by its terms. (l) Each of the parties request that the Plan Administrator of the Plan determine and acknowledge that this Order is a Qualified Domestic Relations Order and further request that the Plan Administrator honor and agree to comply with the same. (m) Both the Participant and the Alternate Payee consent to the distribution described in paragraph (g) above and the Alternate Payee has completed the required forms as specified by the Plan Administrator. 16
IN WITNESS WHEREOF, the undersigned have signed this agreement on the date indicated below: Participant signature: Date: / / Alternate Payee signature: Date: / / APPROVAL BY COURT: Date: / / Judge Court A completed copy of this QDRO must be sent to the Plan Administrator at the following address: 17
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EM28715 10/10 PAD0803-0077 LCN200810-2021620