Dividing retirement benefits on divorce, and what ERISA has to say about it

Divorce, unfortunately, is a fact of life, and can affect an employee’s benefits in a retirement plan. Jimmy Verner, who practices family law, illustrates why there must be a Qualified Domestic Relations Order (QDRO) to divide those retirement benefits in his newly launched North Texas Divorce and Family Law Blog. But a QDRO only comes into existance when the Plan Administrator of the retirement plan approves a domestic relations issued by a court.

Mr. Verner’s perspective, of course, is that of the attorney representing one of the two parties in the divorce. So here’s a QDRO viewed from the perspective of the Plan Administrator – the individual or individuals responsible for the administration of the retirement plan and a fiduciary. The Plan Administrator would look to see that the domestic relations order contains certain information to qualify as a QDRO under ERISA:

  • 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.
  • The number of payments or time period to which the order applies.

The Plan Administrator would also look to see that the QDRO not contain certain information:

  • 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.
  • 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.

Pretty basic, but ERISA being ERISA, pretty complicated. Fortunately, the three federal agencies charged with ERISA oversight have published comprehensive guidance.

And from everyone’s standpoint, it’s best for the Plan Administrator to review a draft of the domestic relations before it gets filed with the court. Better to resolve issues before the order is filed than the Plan Adminstrator having to determine that the domestic relations order really isn’t a QDRO.