Qualified Domestic Relations Orders
Generally, the law prohibits an employee who is entitled to a retirement plan distribution from assigning the payments to someone else. The exception is for Qualified Domestic Relations Orders, which are court orders in a domestic relations case (divorce, for example) that require you to send the benefits to someone other than the employee (usually to the ex-spouse or children).
A QDRO cannot require the plan to provide a type, form of benefit, or option not otherwise provided by the plan.
A QDRO can, however, require the plan to begin to distribute benefits earlier for the payee than for the employee.
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You receive a QDRO that requires that the benefits be distributed at the earliest retirement age that is (1) the earliest date a participant is entitled to a distribution or (2) the latter of the date the participant turns age 50 or the earliest date the participant could begin receiving a distribution from the plan if the participant separates from service. You would have to comply with this order even though it might require you to distribute benefits earlier than the plan documents would otherwise have required.
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A court's domestic relations order must be "qualified." In order to be "qualified," the order must specify the following:
- the name and address of the alternate payee who will receive benefits from the plan instead of the participant
- the name and address of the participant
- the percentage or amount of benefits to be paid or the manner of determining the amount
- the number of payments or the period
- the qualified retirement plan to which the order applies
What to do. If you receive a QDRO, you or your administrator should do the following:
- Notify the plan participant and designated payee of the receipt of a domestic relations order.
- Segregate accounts or amounts for the alternate payee.
- Pay the amounts due within 18 months of the date specified in the order once you determine it to be qualified.
- Coordinate information when the alternate payee is the former spouse and there is a current spouse for qualified preretirement and qualified joint and survivor annuities.
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