2 The Basics for Child Support Enforcement QUALIFIED DOMESTIC RELATIONS ORDERS QDROS Jennifer A. Coultas Division Chief, Court Operations County of Los Angeles

3 History: Then and Now  Prior to 1974 – Private pension plans were not regulated by the federal government  1974 – Implementation of Employee Retirement Income Security Act  Anti-Alienation Clause of ERISA  “Benefits cannot be assigned or alienated”  [29 USC 1056(d)(1)]

4 History: Then and Now  1974 – 1984 State divorce law developments  Pension rights earned or acquired during marriage were marital or community property  In re Marriage of Brown 544 P.2d 561 (Cal. 1976)  These developments give rise to:  Apparent conflict with ERISA  Pre-Emption Issues  1984 Retirement Equity Act (REA)  P.L (1984)

5 History: Then and Now  1984 Retirement Equity Act (REA)  Amended Key Sections of ERISA and Internal Revenue Code  Certain orders entered in state domestic relations cases must be accepted & honored by ERISA qualified pension plans  REA specifies the required characteristics of a QDRO  Under REA, QDRO is expressly exempted from the anti-assignment and alienation clause of 1056(d)(1) of ERISA

6 History: Then and Now  Non-ERISA Plans:  Military  Federal  State & Local Government  Similar developments between  Plans divisible in a parallel although not precisely identical fashion as ERISA plans  Similar developments

7 History: Then and Now  Battle has now shifted  Have parties complied with requirements of the Retirement Equity Act?  Is an order in a domestic relations case qualified under the terms of ERISA?

8 What is a Qualified Domestic Relations Order (QDRO)?  A Domestic Relations Order (DRO) that meets certain requirements specified under the law, is signed by a judicial officer in the appropriate court, and is approved by the Plan Administrator  This DRO is then a QDRO

9 The Requirements in a Nutshell Before it can be a QDRO, it must be a DRO. ■ A judgment, decree or order, including approval of a property settlement agreement ■ That is made pursuant to state domestic relations law

10 The Requirements in a Nutshell ■That relates to the provision of child support, alimony or marital property rights  For the benefit of a spouse, former spouse, child or ■Other dependent

11 The Requirements in a Nutshell To constitute a QDRO, a DRO must: ■Create or recognize the Alternate Payee’s right to receive, or assign to the Alternate Payee ■All or a portion of the benefits otherwise payable with respect to a Participant under the plan

12 The Requirements in a Nutshell The Four “Do’s” To become a QDRO, the DRO must contain: ■Name and last known mailing address of Participant and Alternate Payee; ■The name of the plan to which the order relates. ■Amount or percentage of P’s benefit to be paid to AP, or manner in which the amount or percentage is to be determined. ■The number of payments or period to which the order applies.

13 The Requirements in a Nutshell The Four “Don'ts” The DRO must not require the plan to: ■Provide any type or form of benefit or option not otherwise provided under the plan (except it may permit early payout to the alternate payee) ; ■ Pay a joint and survivor annuity to the alternate payee and his or her subsequent spouse.

14 The Requirements in a Nutshell The Four “Don'ts” (continued) ■Provide increased benefits (determined actuarially). ■Pay benefits that are assigned to another alternate payee under a prior QDRO.

15 The Requirements in a Nutshell Who can be an Alternate Payee? ■ Spouse ■Former Spouse ■Child ■Other dependent All of these relate to the participant.

16 The Requirements in a Nutshell QDRO Procedures ■All plans must have written QDRO procedures ■QDRO procedures may contain default interpretations ■but clear disclosure of the defaults is critical

17 The Requirements in a Nutshell What actions must a Plan Administrator take when it receives a DRO? ■Acknowledge ■Review ■Notify

18 The Requirements in a Nutshell What must the Plan Administrator do with the participant’s benefits upon receipt of a DRO? ■Segregate ■Account separately ■Freeze disbursements

19 Perfect v. Good Enough - Is There a Difference? Substantial compliance ■ Plan Administrators generally have applied the QDRO requirements relatively strictly. ■Courts often have applied the requirements more liberally, sometimes straining to approve a QDRO in an effort to obtain a fair and equitable result.

20 Is it too late for a QDRO? What if the participant is in retirement pay status when the DRO is served on the plan? ■Retirement election irrevocable ■Share each payment when made (no separate interest) ■Rights of current spouse may supersede alternate payee’s rights to survivor benefits

21 Is it too late for a QDRO? What if the Participant is deceased when the DRO is served on the Plan? ■Answer depends upon jurisdiction ■Answer depends upon plan terms ■Answer depends upon whether participant is remarried

22 Which plans do not require a QDRO?  IRA’s  SEP’s  SIMPLE’s  Non-Qualified Plans  Governmental (Federal, state, local or political subdivision) Plans

23 When may benefits commence?  Primarily dependent on plan provisions  Secondarily dependent on the provisions of the QDRO  Can always require payment on or after the date on which the participant attains the earliest retirement age  Earliest retirement age is the earlier of the date of entitlement to a distribution, or the earlier of attainment of age 50 or the earliest date the participant could begin receiving benefits if he/she terminated

24 Defined Benefit or Defined Contribution?  Defined Contribution Plans [Profit Sharing, 401(k)]  Otherwise known as account balance plan  Divide account balance either by percentage or amount  Primarily dependent on plan provisions  Excellent for use on with arrears collection

25 Defined Benefit or Defined Contribution?  Defined Benefit Plans  Participant contribution unknown  Monthly or annual benefit derived by formula at retirement age  Independent or separate interest approach  Shared interest approach  Useful for ongoing monthly support obligation  Cannot exceed Participant’s monthly benefit

26 Defined Benefit or Defined Contribution?  Defined Benefit vs. Defined Contribution Plans – Understanding the Difference  Language used for various issues  Methodology of split  Forms of payment  Timing of payment  Death Benefits

27 First things First Obtain the four key items of information:  Name & current address of Participant and the Alternate Payee  Social Security Number for Participant and the Alternate Payee  Exact name of the Plan to which the DRO will apply  The amount of benefits available from each Plan  The form in which benefits may be paid  All options concerning the form and timing of payments

28 First things First Obtain the three key plan documents:  The Summary Plan Description  The Annual Benefits Statement  The Plan’s Written QDRO Procedures If available:  Sample of Plan Approved QDRO

29 Step by Step Guide ■Step 1 – Obtain the key items of information ■Step 2 – Request the plan documents ■Step 3 – Read the plan documents ■Step 4 – Read the QDRO procedures ■Step 5 – Review the sample QDRO

30 Step by Step Guide ■Step 6 – Draft the QDRO ■Step 7 – Submit QDRO to Plan legal department for review and approval ■Step 8 – Make changes; re-submit if necessary ■Step 9 – Once approved, set OSC for QDRO approval by court

31 When should you use a QDRO? ■The Participant is already retired and receiving payments from the plan (in pay status) ■The Participant is currently unemployed but has pension rights from previous employment ■The Participant has evaded previous enforcement efforts ■Most or all of a Participant’s assets are located in another state

32 Final Thoughts ■QDROs are a useful enforcement tool ■Communicate with the Plan Legal Department ■Be creative with your non-paying cases ■Refer to suggested websites for more information ■Feel free to contact me: ✷