The Department of Labor's Employee Benefits Security Administration
released March 6 an interim final rule clarifying issues relating to
the timing and order of qualified domestic relations orders.
Section 1001 of the Pension Protection Act (Pub. Law 109-280)
amended Employee Retirement Income Security Act Section 206(d)(3) and
requires the Labor Department to issue (within one year after
enactment of the PPA) regulations clarifying that an order does not
fail to be a QDRO merely because of the time it is issued, or because
it modifies a prior order or QDRO.
The rule is effective April 6, 2007. Written comments must be
received by May 7, 2007.
Written comments should be addressed to the Office of Regulations
and Interpretations, Employee Benefits Security Administration, Room
N-5669, U.S. Department of Labor, 200 Constitution Ave., N.W.,
Washington, D.C. 20210, Attention: QDRO Regulation. Commenters may
submit responses electronically by e-mail to e-ORI@dol.gov, or by
using the federal e-rulemaking portal at
http://www.regulations.gov.
Timing of QDROs.
Under a qualified pension plan, a plan participant's benefits
generally may not be assigned or alienated to creditors. Benefits,
however, may be assigned under a QDRO that creates a right of an
alternate payee, including a former spouse or child, to a
participant's benefits, if the order meets certain procedural
requirements.
According to the rule, to qualify as a QDRO, an order must be a
domestic relations order issued pursuant to state domestic relations
law, create an alternate payee's rights to receive all or a portion of
the participant's benefits, and clearly specify the participant,
alternate payee, and the plan to which the order applies.
PPA Section 1001 directed the department to clarify whether a
domestic relations order that is issued after a QDRO, or revises a
QDRO, will be considered a QDRO, and whether a QDRO will fail to be
treated as one because of the time at which it was issued.
The interim final rule provides that a domestic relations order
will not fail to be a QDRO solely because:
• it
is issued after, or revises, another QDRO;
• it
is issued after the parties divorce; or
• it
is issued after the participant's annuity starting date.
However, a QDRO may fail if it requires the plan to provide a type
or form of benefit, or any option, not otherwise provided under the
plan, the rule said.
The Labor Department gives examples in the rule to illustrate each
provision.
This interim final rule is expected to be published in the
Federal Register March 7,
2007.
Fr. Doc. E7-3820
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2530
RIN 1210-AB15
Interim Final Rule Relating to Time and Order of Issuance of
Domestic Relations Orders
AGENCY: Employee Benefits Security Administration,
Department of Labor.
ACTION: Interim final rule with request for
comments.
SUMMARY: This document contains an interim final rule issued
under section 1001 of the Pension Protection Act of 2006, Public Law
109-280 (PPA), which requires the Secretary of Labor to issue, not
later than 1 year after the date of the enactment of the PPA,
regulations clarifying certain issues relating to the timing and order
of domestic relations orders under section 206(d)(3) of the Employee
Retirement Income Security Act of 1974, as amended (ERISA). The rule
contained in this document provides guidance to plan administrators,
service providers, participants, and alternate payees on the qualified
domestic relations order (QDRO) requirements under ERISA. The rule is
being adopted in response to the specific statutory directive
contained in the PPA. Interested persons are invited to submit
comments on the interim final rule for consideration by the Department
of Labor in developing a final rule.
DATES: Effective date: The interim final rule is
effective on April 6, 2007.
Comment date: Written comments on the interim final rule
must be received by May 7, 2007.
ADDRESSES: To facilitate the receipt and processing of
comments, EBSA encourages interested persons to submit their comments
electronically to e-ORI@dol.gov, or by using the Federal eRulemaking
portal
http://www.regulations.gov
(follow instructions for submission of comments). Persons submitting
comments electronically are encouraged not to submit paper copies.
Persons interested in submitting comments on paper should send or
deliver their comments (preferably three copies) to: Office of
Regulations and Interpretations, Employee Benefits Security
Administration, Room N-5669, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC 20210, Attention: QDRO
Regulation. All comments will be available to the public, without
charge, online at
http://www.regulations.gov
and http://www.dol.gov/ebsa, and
at the Public Disclosure Room, Employee Benefits Security
Administration, U.S. Department of Labor, Room N-1513, 200
Constitution Avenue, NW., Washington, DC,
20210.
FOR FURTHER INFORMATION CONTACT: Yolanda R. Wartenberg,
Office of Regulations and Interpretations, Employee Benefits Security
Administration, U.S. Department of Labor, Washington, DC 20210, (202)
693-8510. This is not a toll free
number.
SUPPLEMENTARY INFORMATION:
A. Qualified Domestic Relations Order
Provisions
Section 206(d)(3) of title I of ERISA, and the related provisions
of section 414(p) of the Internal Revenue Code of 1986 (Code),
establish a limited exception to the prohibitions against assignment
and alienation contained in ERISA section 206(d)(1) and Code section
401(a)(13).1 Under this
limited exception, a participant's benefits under a pension plan may
be assigned to an alternate payee, defined as the participant's
spouse, former spouse, child, or other dependent, pursuant to an order
that constitutes a qualified domestic relations order (QDRO) within
the meaning of those provisions. Such QDROs, in addition, survive the
federal preemption of State law imposed by ERISA section 514(a) by
virtue of ERISA section 514(b)(7).
Pursuant to the QDRO provisions, a plan administrator must
determine, in accordance with specified procedures, whether an order
purporting to divide a participant's benefits under a plan meets the
applicable requirements set forth in section 206(d)(3) of ERISA. If
the plan administrator determines that the order meets these
requirements and is, accordingly, a QDRO within the meaning of section
206(d)(3), the plan administrator must distribute the assigned portion
of the participant's benefits to the alternate payee or payees named
in the order in accordance with the terms of the
order.
Subparagraphs (G) and (H) of ERISA section 206(d)(3) set forth
provisions relating to the procedures that a plan must establish, and
a plan administrator must observe, in determining whether an order is
a QDRO and in administering the plan and the participant's benefits
during the period in which the plan administrator is making such a
determination. The plan's procedures must be reasonable, must be in
writing, must require prompt notification and disclosure of the
procedures to participants and alternate payees upon receipt of an
order, and must permit alternate payees to designate representatives
for notice purposes. In addition, the plan administrator must complete
the determination process and notify participants and alternate payees
of its determination within a reasonable period after receipt of the
order.
Subparagraph (H) of section 206(d)(3) provides specific procedural
protection of a potential alternate payee's interest in a
participant's benefits during the plan's determination process and for
a period of up to 18 months (the 18-month period) during which the
issue of the qualified status of a domestic relations order is being
determined-whether by the plan administrator, by a court of competent
jurisdiction, or otherwise. During the 18-month period, a plan
administrator must separately account for any amounts that would have
been payable to the alternate payee if the order had been immediately
treated as a QDRO and must pay these amounts (including any interest
thereon) to the alternate payee if the order is deemed qualified
within such period. If the issue as to whether the order is a QDRO is
not resolved within the 18-month period, the plan administrator is to
pay such amounts to the person or persons who would have been entitled
to the amounts if there had been no order. Any determination that an
order is a QDRO that is made after the close of the 18-month period is
to be applied prospectively only.
If a plan fiduciary, acting in accordance with the fiduciary
responsibility provisions of part 4 of title I of ERISA, treats an
order as a QDRO (or determines that such an order is not a QDRO) and
distributes benefits in accordance with that determination, paragraph
(I) of section 206(d)(3) provides that the obligations of the plan and
its fiduciaries to the affected participants and alternate payees with
respect to the distribution shall be treated as
discharged.
The QDRO provisions detail specific requirements that an order must
satisfy in order to constitute a QDRO. The order must be a
“domestic relations order” issued pursuant to a State
domestic relations law (including a community property law) 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. Section 206(d)(3)(B)(ii). It must create
or recognize the existence of an alternate payee's right to receive
all or a portion of the benefits payable to a participant under a
plan. Section 206(d)(3)(B)(i). Further, it must clearly specify 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; the amount or percentage of the participant's benefits to be
paid by the plan(s) to each such alternate payee, or the manner in
which such amount or percentage is to be determined; the number of
payments or period to which the order applies; and each plan to which
the order applies. Section 206(d)(3)(C). An order will fail to be a
QDRO, however, if it requires the plan to provide any type or form of
benefit, or any option, not otherwise provided under the plan; to
provide increased benefits determined on the basis of actuarial value;
or 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. Section 206(d)(3)(D).
B. Pension Protection Act of
2006
Under section 1001 of the Pension Protection Act of 2006 (PPA),
Public Law 109-280, section 1001, 120 Stat. 780 (2006), Congress
instructed the Secretary of Labor to issue regulations, not later than
1 year after the date of the enactment, under section 206(d)(3) of
ERISA and section 414(p) of the Code, to clarify that--(1) a domestic
relations order otherwise meeting the requirements to be a QDRO,
including the requirements of section 206(d)(3)(D) of ERISA and
section 414(p)(3) of the Code, shall not fail to be treated as a QDRO
solely because--(A) the order is issued after, or revises, another
domestic relations order or QDRO; or (B) of the time at which it is
issued. Section 1001 of the PPA also requires that the regulations
clarify that such orders are subject to all of the same requirements
and protections that apply to QDROs, including the provisions of
section 206(d)(3)(H) of ERISA and section 414(p)(7) of the
Code.
C. Overview of Interim Final
Rule
Scope of the Regulation
Paragraph (a) of the regulation provides that the scope of the
regulation is to implement the directive contained in section 1001 of
the PPA to clarify certain timing issues with respect to domestic
relations orders and qualified domestic relations orders under
ERISA.
Subsequent Domestic Relations
Orders
Paragraph (b)(1) of the regulation provides that a domestic
relations order otherwise meeting ERISA's requirements to be a QDRO
shall not fail to be treated as a QDRO solely because the order is
issued after, or revises, another domestic relations order or QDRO.
Paragraph (b)(2) provides examples of this
rule.2 Example 1 illustrates
this rule as applied to a subsequent order revising an earlier QDRO
involving the same parties. Example 2 illustrates this rule in the
context of a subsequent order involving the same participant and a
different alternate payee.
Timing of Domestic Relations
Order
Paragraph (c)(1) of the regulation provides that a domestic
relations order otherwise meeting ERISA's requirements to be a QDRO
shall not fail to be treated as a QDRO solely because of the time at
which it is issued. Paragraph (c)(2) provides examples of this rule.
Example 1 illustrates the principle that a domestic relation order
will not fail to be a QDRO solely because it is issued after the death
of the participant. Example 2 illustrates that a domestic relation
order will not fail to be a QDRO solely because it is issued after the
parties divorce. Example 3 illustrates that an order would not fail to
be a QDRO solely because it is issued after the participant's annuity
starting date.
Requirements and Protections
Paragraph (d)(1) of the regulation provides that any domestic
relations order described in paragraph (b) or (c) of the regulation
shall be subject to the same requirements and protections that apply
to all QDROs under section 206(d)(3) of ERISA. Paragraph (d)(2)
provides examples of this rule. Example 1 illustrates that, although
an order will not fail to be a QDRO solely because it is issued after
the death of the participant, the order would fail to be a QDRO if it
requires the plan to provide a type or form of benefit, or any option,
not otherwise provided under the plan. Example 2 illustrates
application of the protective rules regarding segregation of payable
benefits to a second order involving the same participant and
alternate payee. Example 3 illustrates that, although an order will
not fail to be a QDRO solely because it is issued after another QDRO,
the order would fail to be a QDRO if it assigns benefits already
assigned to another alternate payee under another
QDRO.
D. Effective Date
The interim final regulation will be effective 30 days after the
date of publication in the Federal Register. The guidance provided by
the interim final regulation is in response to the direction from
Congress in section 1001 of the PPA to the Secretary of Labor to issue
regulations to clarify current law under section 206(d)(3) of ERISA.
The Department, therefore, has determined it is necessary and
appropriate to proceed with an interim final rule to provide the
clarification mandated by Congress, while also requesting public
comments on the matter for the purpose of drafting a final
rule.
E. Justification for Interim Final
Rulemaking
This regulation incorporates, with minor changes, language in
section 1001 of the Pension Protection Act. The changes do not modify
the meaning of the statutory language. In the Department's view,
Congress directed the Secretary to adopt the substance of this
language as a clarification of current law. In issuing these
regulations, the Secretary has not deviated from the narrow
Congressional directive. The examples included in the regulation
merely provide interpretive guidance by explaining how the statutory
language would apply to particular facts. Therefore, in accordance
with section 553(b) of the Administrative Procedure Act, 5 U.S.C.
553(b), the Department finds for good cause that notice and public
procedure on this regulation is unnecessary. To the extent that the
examples go beyond the statutory language, they are purely
interpretive and are not subject to the notice and public procedure
requirements of section 553(b).
F. Request for Comments
The Department invites comments from interested persons on all
aspects of the interim final rule, including whether, and to what
extent, there are additional factual scenarios that should be added to
the examples already in the interim final rule. To facilitate the
receipt and processing of comments, EBSA encourages interested persons
to submit their comments electronically by e-mail to e-ORI@dol.gov, or
by using the Federal eRulemaking portal at
http://www.regulations.gov
(follow instructions for submission of comments). Persons submitting
comments electronically are encouraged not to submit paper copies.
Persons interested in submitting comments on paper should send or
deliver their comments (preferably three copies) to: Office of
Regulations and Interpretations, Employee Benefits Security
Administration, Room N-5669, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC 20210, Attention: QDRO
Regulation. All comments will be available to the public, without
charge, online at
http://www.regulations.gov
and http://www.dol.gov/ebsa, and
at the Public Disclosure Room, Employee Benefits Security
Administration, U.S. Department of Labor, Room N-1513, 200
Constitution Avenue, NW., Washington, DC,
20210.
G. Regulatory Impact Analysis
Executive Order 12866 Statement
Under Executive Order 12866 (58 FR 51735), the Department must
determine whether a regulatory action is “significant” and
therefore subject to review by the Office of Management and Budget
(OMB). Section 3(f) of the Executive Order defines a
“significant regulatory action” as an action that is
likely to result in a rule (1) having an annual effect on the economy
of $100 million or more, or adversely and materially affecting a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local or tribal
governments or communities (also referred to as “economically
significant”); (2) creating serious inconsistency or otherwise
interfering with an action taken or planned by another agency; (3)
materially altering the budgetary impacts of entitlement grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raising novel legal or policy issues arising out of
legal mandates, the President's priorities, or the principles set
forth in the Executive Order. The Department has determined that this
regulatory action is not economically significant within the meaning
of section 3(f)(1) the Executive Order. However, the Office of
Management and Budget (OMB) has determined that the action is
significant within the meaning of section 3(f)(4) of the Executive
Order, and the Department accordingly provides the following
assessment of its potential costs and
benefits.
This interim final rule is intended to clarify the statutory
requirements for QDROs under section 206(d)(3) of ERISA and section
414(p) of the Code. The provisions of section 206(d)(3) generally
assist State authorities in deciding permissible ways in which pension
benefits may be divided in domestic relations matters. The rules and
processes under section 206(d)(3) make it possible for plan
administrators to determine whether a State order seeking to assign
pension benefits to an alternate payee should be given effect under
the plan; clear rules concerning what constitutes a QDRO have the
effect of assisting plan administrators in reviewing orders received
by the plan, as well as participants and alternate payees in planning
how to take pension assets into account when significant events
require making a division of marital
assets.
In directing the Department, in section 1001 of the Pension
Protection Act, to clarify the application of the QDRO provisions,
Congress expressed the view that existing uncertainty about the
application of those provisions has caused difficulties meriting
resolution through regulatory action. Uncertainty concerning the
application of the QDRO provisions can impose litigation and other
costs on plans, participants, and alternate payees, as well as on
State domestic relations authorities, that will be reduced through the
promulgation of this rule. Consistent with the view of Congress, the
rule clarifies, first, that the sequence in which multiple orders may
be issued does not in itself affect whether the orders are QDROs, and,
second, that the time at which an order is issued does not, in itself,
determine whether an order is or is not a QDRO. The rule further
reiterates that an order must meet the specific requirements of
sections 206(d)(3) of ERISA and section 414(p) of the
Code.
By reducing uncertainty over the application of the statutory
requirements in specific circumstances, the rule is expected to reduce
costs that might otherwise arise from the necessity of resolving
uncertainty in such circumstances. By providing clearer rules for plan
administrators, the rule is also expected to increase the efficiency
of plan administration. In addition, the Department is issuing this
rule in direct response to a Congressional directive. As described
above, section 1001 of the Pension Protection Act requires the
Department to issue regulations clarifying that an order otherwise
meeting the requirements of section 206(d)(3) of ERISA for a QDRO
should not fail to be treated as a QDRO solely because it was issued
after or revised another order, or because of the time at which it was
issued. In issuing this interim final rule, therefore, the Department
is fulfilling objectives expressly endorsed by Congress. Because the
rule applies only in certain specific circumstances and affects only a
small subset of domestic relations orders, the Department believes
that its economic impact will be small, overall, but
positive.
The rule is not anticipated to impose increased compliance costs,
since it merely establishes the legal effect of certain sequences of
events. Although it may cause some orders to be treated as QDROs that
otherwise might be disputed (or fail to be treated as a QDRO), the
rule provides certainty with respect to the circumstances it covers,
which will aid State authorities seeking to divide pension benefits
and assist plan administrators seeking to discharge their obligations
under section 206(d)(3) of ERISA, without limiting the power of State
authorities to determine the proper division of marital assets. The
rule is expected generally to provide benefits to pension plans, plan
participants and alternate payees, and State domestic relations
authorities by increasing the clarity of the rules that apply to
QDROs.
Based on the foregoing assessment, the Department concludes that
promulgation of this interim final rule will provide substantial
benefits without imposing major
costs.
Paperwork Reduction Act
The interim final regulation being issued here is not subject to
the requirements of the Paperwork Reduction Act of 1980 (44 U.S.C.
3501 et seq.) because it does not contain an “information
collection” as defined in 44 U.S.C. 3502
(11).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are
likely to have a significant economic impact on a substantial number
of small entities. Unless an agency certifies that a proposed rule
will not have a significant economic impact on a substantial number of
small entities, section 603 of the RFA requires that the agency
present an initial regulatory flexibility analysis at the time of the
publication of the notice of proposed rule-making describing the
impact of the rule on small entities and seeking public comment on
such impact. Because this rule is being issued as an interim final
rule, the RFA does not apply and the Department is not required to
either certify that the rule will not have a significant impact on a
substantial number of small businesses or conduct an initial
regulatory flexibility analysis. Nevertheless, the Department has
considered the likely impact of the interim rule on small entities in
connection with its assessment under Executive Order 12866, described
above, and believes this rule will not have a significant impact on a
substantial number of small entities. For purposes of this discussion,
the Department deemed a small entity to be an employee benefit plan
with fewer than 100 participants. The basis of this definition is
found in section 104(a)(2) of ERISA, which permits the Secretary of
Labor to prescribe simplified annual reports for pension plans which
cover fewer than 100 participants. The Department invites comments on
the effect of the interim final rule on small
entities.
Congressional Review Act
The interim final rule being issued here is subject to the
Congressional Review Act provisions of the Small Business Regulatory
Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and will be
transmitted to Congress and the Comptroller General for review. The
interim final rule is not a “major rule” as that term is
defined in 5 U.S.C. 804, because it does not result in (1) an annual
effect on the economy of $100 million or more; (2) a major increase in
costs or prices for consumers, individual industries, or federal,
State, or local government agencies, or geographic regions; or (3)
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic and
export markets.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), the interim final rule does not include any federal mandate
that may result in expenditures by State, local, or tribal
governments, or impose an annual burden exceeding $100 million on the
private sector.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires federal agencies to adhere to
specific criteria in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. This interim final rule does not have
federalism implications because it has no substantial direct effect on
the States, on the relationship between the national government and
the States, or on the distribution of power and responsibilities among
the various levels of government. Section 514 of ERISA provides, with
certain exceptions specifically enumerated, that the provisions of
titles I and IV of ERISA supersede any and all laws of the States as
they relate to any employee benefit plan covered under ERISA. One
exception described in section 514(b)(7) is for qualified domestic
relations orders, as defined in section 206(d)(3) of ERISA. The
interim rule does not alter the provisions of the statute, but merely
clarifies the status of certain types of domestic relations orders
under ERISA.
List of Subjects in 29 CFR Part
2530
Alternate payee, Divorce, Domestic relations orders, Employee
benefit plans, Marital property, Pensions, Plan administrator,
Qualified domestic relations orders,
Spouse.
For the reasons set forth in the preamble, the Department amends
Subchapter D, Part 2530 of Title 29 of the Code of Federal Regulations
as follows:
Subchapter D-Minimum Standards for Employee Pension Benefit Plans
Under the Employee Retirement Income Security Act of
1974
PART 2530-RULES AND REGULATIONS FOR MINIMUM STANDARDS FOR EMPLOYEE
PENSION BENEFIT PLANS
1. The authority citation for part 2530 is revised to read as
follows:
Authority: Secs. 201, 202, 203, 204, 210, 505, 1011, 1012, 1014,
and 1015, Pub. L. 93-406, 88 Stat. 852-862, 866-867, 894, 898-913,
924-929 (29 U.S.C. 1051-4, 1060, 1135, 26 U.S.C. 410, 411, 413, 414);
Secretary of Labor's Order No. 13-76. Section 2530.206 also issued
under sec. 1001, Pub. L. 109-280, 120 Stat.
780.
2. Add §2530.206 to read as
follows:
§2530.206 Time and order of issuance of domestic relations
orders.
(a) Scope. This section implements section 1001 of the Pension
Protection Act of 2006 by clarifying certain timing issues with
respect to domestic relations orders and qualified domestic relations
orders under the Employee Retirement Income Security Act of 1974, as
amended (ERISA), 29 U.S.C. 1001 et
seq.
(b) Subsequent domestic relations orders. (1) Subject to paragraph
(d)(1) of this section, a domestic relations order shall not fail to
be treated as a qualified domestic relations order solely because the
order is issued after, or revises, another domestic relations order or
qualified domestic relations order.
(2) The rule described in paragraph (b)(1) of this section is
illustrated by the following
examples:
Example (1). Subsequent domestic relations order between the same
parties. Participant and Spouse divorce, and the administrator of
Participant's 401(k) plan receives a domestic relations order. The
administrator determines that the order is a QDRO. The QDRO allocates
a portion of Participant's benefits to Spouse as the alternate payee.
Subsequently, before benefit payments have commenced, Participant and
Spouse seek and receive a second domestic relations order. The second
order reduces the portion of Participant's benefits that Spouse was to
receive under the QDRO. The second order does not fail to be treated
as a QDRO solely because the second order is issued after, and reduces
the prior assignment contained in, the first
order.
Example (2). Subsequent domestic relations order between different
parties. Participant and Spouse divorce, and the administrator of
Participant's 401(k) plan receives a domestic relations order. The
administrator determines that the order is a QDRO. The QDRO allocates
a portion of Participant's benefits to Spouse as the alternate payee.
Participant marries Spouse 2, and then they divorce. Participant's
401(k) plan administrator subsequently receives a domestic relations
order pertaining to Spouse 2. The order assigns to Spouse 2 a portion
of Participant's 401(k) benefits not already allocated to Spouse 1.
The second order does not fail to be a QDRO solely because the second
order is issued after the plan administrator has determined that an
earlier order pertaining to Spouse 1 is a
QDRO.
(c) Timing. (1) Subject to paragraph (d)(1) of this section, a
domestic relations order shall not fail to be treated as a qualified
domestic relations order solely because of the time at which it is
issued.
(2) The rule described in paragraph (c)(1) of this section is
illustrated by the following
examples:
Example (1). Orders issued after death. Participant and Spouse
divorce, and the administrator of Participant's plan receives a
domestic relations order, but the administrator finds the order
deficient and determines that it is not a QDRO. Shortly thereafter,
Participant dies while actively employed. A second domestic relations
order correcting the defects in the first order is subsequently
submitted to the plan. The second order does not fail to be treated as
a QDRO solely because it is issued after the death of the
Participant.
Example (2). Orders issued after divorce. Participant and Spouse
divorce. As a result, Spouse no longer meets the definition of
“surviving spouse” under the terms of the plan.
Subsequently, the plan administrator receives a domestic relations
order requiring that Spouse be treated as the Participant's surviving
spouse for purposes of receiving a death benefit payable under the
terms of the plan only to a participants surviving spouse. The order
does not fail to be treated as a QDRO solely because, at the time it
is issued, Spouse no longer meets the definition of a “surviving
spouse” under the terms of the
plan.
Example (3). Orders issued after annuity starting date. Participant
retires and commences benefit payments in the form of a straight life
annuity, with respect to which Spouse waives the surviving spousal
rights provided under the plan and section 205 of ERISA. Participant
and Spouse divorce after Participant's annuity starting date and
present the plan with a domestic relations order providing for Spouse,
as alternate payee, to receive half of the benefit payments that are
made to Participant after a specified future date. Pursuant to
paragraph (c)(1) of this section, the order does not fail to be a QDRO
solely because it is issued after the annuity starting
date.
(d) Requirements and protections. (1) Any domestic relations order
described in this section shall be subject to the same requirements
and protections that apply to qualified domestic relations orders
under section 206(d)(3) of ERISA.
(2) The rule described in paragraph (d)(1) of this section is
illustrated by the following
examples:
Example (1). Type or form of benefit. Participant and Spouse
divorce, and their divorce decree provides that the parties will
prepare a domestic relations order assigning 50 percent of
Participant's benefits under a 401(k) plan to Spouse to be paid in
monthly installments over a ten-year period. Shortly thereafter,
Participant dies while actively employed. A domestic relations order
consistent with the decree is subsequently submitted to the 401(k)
plan; however, the plan does not provide for ten-year installment
payments of the type described in the order. Pursuant to paragraph
(c)(1) of this section, the order does not fail to be treated as a
QDRO solely because it is issued after the death of Participant, but
the order would fail to be a QDRO under section 206(d)(3)(D)(i) and
paragraph (d)(1) of this section because the order requires the plan
to provide a type or form of benefit, or any option, not otherwise
provided under the plan.
Example (2). Segregation of payable benefits. Participant and
Spouse divorce, and the administrator of Participant's plan receives a
domestic relations order under which Spouse would begin to receive
benefits immediately if the order is determined to be a QDRO. The plan
administrator separately accounts for the amounts covered by the
domestic relations order as is required under section 206(d)(3)(H)(v)
of ERISA. The plan administrator finds the order deficient and
determines that it is not a QDRO. Subsequently, after the expiration
of the segregation period pertaining to that order, the plan
administrator receives a second domestic relations order relating to
the same parties under which Spouse would begin to receive benefits
immediately if the second order is determined to be a QDRO.
Notwithstanding the expiration of the first segregation period, the
amounts covered by the second order must be separately accounted for
by the plan administrator for an 18-month period, in accordance with
section 206(d)(3)(H) of ERISA and paragraph (d)(1) of this
section.
Example (3). Previously assigned benefits. Participant and Spouse
divorce, and the administrator of Participant's 401(k) plan receives a
domestic relations order. The administrator determines that the order
is a QDRO. The QDRO assigns a portion of Participant's benefits to
Spouse as the alternate payee. Participant marries Spouse 2, and then
they divorce. Participant's 401(k) plan administrator subsequently
receives a domestic relations order pertaining to Spouse 2. The order
assigns to Spouse 2 a portion of Participant's 401(k) benefits already
assigned to Spouse 1. The second order does not fail to be treated as
a QDRO solely because the second order is issued after the plan
administrator has determined that an earlier order pertaining to
Spouse 1 is a QDRO. The second order, however, would fail to be a QDRO
under section 206(d)(3)(D)(iii) and paragraph (d)(1) of this section
because it assigns all or a portion of Participant's benefits that are
already assigned to Spouse 1 by the prior
QDRO.
Signed at Washington, DC, this 28th day of February,
2007.
Bradford P. Campbell,
Acting Assistant Secretary,
Employee Benefits Security
Administration,
Department of Labor.
1
The QDRO provisions were added to ERISA and the Code by the Retirement Equity Act of 1984 (REA), Public Law 96-397, 96 Stat. 1438 (1984). Except where no corresponding provision exists, all references to paragraphs of ERISA section 206(d)(3) should be read to refer to corresponding provisions of Code section 414(p). The Secretary of Labor has authority to interpret the QDRO provisions, section 206(d)(3), and its parallel provision at section 414(p) of the Code, and to issue QDRO regulations in consultation with the Secretary of the Treasury. 29 USC 1056(d)(3)(N). The Secretary of the Treasury has authority to issue rules and regulations necessary to coordinate the requirements of section 414(p) (and the regulations issued by the Secretary of Labor thereunder) with the other provisions of Chapter I of Subtitle A of the Code. 26 U.S.C. 401(n). The Secretary of the Treasury has been consulted on this interim final rule.
2
The examples in paragraphs (b)(2), (c)(2) and (d)(2) of the regulation show how the rules in paragraphs (b)(1), (c)(1) and (d)(1), respectively, apply to specific facts. They do not represent the only circumstances for which these rules would provide clarification.
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