Benefits attorneys like to focus on businesses and benefit plan structures for employees. However, there is an overlap between benefits law, family law, and estate law. For example, a couple where one partner was the primary breadwinner while the other stayed home caring for family, the partner who stayed home may be entitled to part of the working partner’s benefit plan. However, This can impact all plans when some one is no longer are married. It can also impact retirement plans when one spouse has been saving and other partner has not because they anticipated retiring together on the funds from only one person’s retirement account.
QDROs
While the IRS and ERISA plans do not, as a general rule, permit a plan participant to assign their interest in a retirement plan to another, there is an exception with domestic situations. A Qualified Domestic Relations Order (QDRO) allows one spouse to receive a portion of the retirement benefits that are assigned to another person or to satisfy child support obligations.
In order to qualify as QDRO, an order must meet certain requirements laid out by ERISA and the Internal Revenue Code. This means the order must contain contact information for the plan participant as well as the alternate payee, details about the plan, details about the division of plan benefits, and the time period the order covers.
Impact of QDROs on Plan Fiduciaries
Court orders that impact benefit plans become part of the fiduciary responsibility of the ERISA administrator. The plan must set up procedures to ensure that orders received meet the requirement and administer the plan according to the QDRO.
A recent case heard in the Southern District of New York about QDRO plans is particularly interesting for plan administrators. The plan in question in Amron v. Yardain Inc. Pension Plan was a defined benefit plan and the plaintiff, the divorced spouse of a participant, alleged breach of contract and ERISA violations which included breach of fiduciary duty. He alleged that the plan miscalculated his retirement benefits.
A QDRO was used to divide by 50% the wife’s fully vested defined benefit pension plan. Years later the husband wanted to take his part of the plan in a lump sum. The parties argued over whether the dispersion should go back to the 2006 valuation which was a discount, or use current date when the husband made the claim for benefit. The court agreed with Husband that the date he receives the lump sum is the date that should be used to discount the benefits to present value.
This case highlights the importance of including a procedure for reviewing and handling QDROs as part of administrating retirement plans to help companies avoid litigation and ensure compliance with ERISA and court orders. The experienced benefits attorneys at Hall Benefits Law are here to help plan administrators understand what regulations are relevant to them and if and when they need to modify retirement payments to comply with QDRO. Learn more about what we do by calling 678-439-6236 or visiting the Hall Benefits Law website.
Hall Benefits Law, LLC
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