Qualified Domestic Relations Order Distribution Information
In order to approve the distribution of account assets to an “alternate payee” (this can be a spouse, former spouse, child or other dependent of a participant), the retirement Plan Administrator must receive a Domestic Relations Order. This is a legal document that specifically addresses the distribution of assets that is to take place from a retirement account to an alternate payee. The plan cannot act on a division of assets to an alternate payee described in a divorce decree or other court order unless such document also contains information meeting all requirements of a Domestic Relations Order. The division of assets in a retirement account to an alternate payee must be addressed in a Domestic Relations Order filed with the court meeting the requirement described below.
CCC does not have a specific model document for DROs: we review a wide range of formats and we are happy to review drafts prior to court filing to make sure the Plan's criteria is met. Note: CCC does not draft legal documents nor do we review legal documents for purposes outside the administration requirements of our client's 403(b) and/or 457(b) Plans.
The DOL has a guidebook concerning QDROs that contains the IRS Sample DRO language. Please note some vendors have easy to follow sample QDRO language available upon request or downloadable from their websites, we are happy to assist in checking if such a sample is available.
All DROs must contain the following information:
- The plan name (this is usually the employer associated with the account to be divided followed by the type of plan, for example ABC Schools 403(b) Plan) and address of the plan (again, this is the address of the employer associated with the account to be divided). A full list of CCC clients and their addresses can be found here.
- The participant name and address
- The alternate payee name and address
- The participant and alternate payee relationship (spouse, former spouse, child or other dependent of a participant)
- The account held under the plan, including the vendor name and the account number(s). Descriptions of the division should include a valuation or division date. The specific description concerning how the account is to be distributed can vary widely: some use percentages of account values, some use an exact dollar figure while other use share numbers. The key is that the division described in the QDRO must be acceptable to the releasing vendor and consistent with descriptions that may be used to complete distribution forms required by the vendor. If income or losses are to be considered from the valuation date to the date of distribution to the alternate payee, that instruction should be included in the Order.
- Must be made pursuant to a referenced State domestic relations law.
- Other information as described under IRC 414(p), available here.
CCC welcomes attorneys drafting a Domestic Relations Order concerning a participant in one of our full service plans to contact CCC prior to filing the order with the court, please click here for our contact information. CCC can review a draft copy and provide feedback to make sure the appropriate information is contained in the document prior to filing a final copy with the court. Vendors vary greatly in their policies concerning how the distribution must be described (some in a specific dollar amount, some in a specific number of shares, others in a percentage of an account as of a named valuation date): CCC will research the needs of the Vendor named in the draft of the order, obtain any forms required by the Vendor, and provide any information or changes to be included in the final version of the Domestic Relations Orders.
A DRO a legal order: in order to act upon this order and approve the distribution outlined in the document CCC must receive a court filed certified copy of the Domestic Relations Order (and related sensitive information coversheet and if applicable vendor forms) to review and, if appropriate, authorize the ordered distribution and write a letter to the vendor verifying the QDRO meets the plan's criteria. If multiple vendors are named in the QDRO, CCC must receive a certified copy of the QDRO for each vendor involved. Once CCC has received the certified copies of the documents we will communicate and provide documents to the QDRO parties concerning any additional action (such as the completion of required forms) that may be required to facilitate the ordered distribution contained in the QDRO. The involved attorney(s) will be provided with copies of the communications to the QDRO parties.
For information concerning the taxation of distributions, please consult the Vendor's 402(f) notice included with their distribution form. (Please note: the IRS provided generic model language for 402(f) Notice in 2009 (Notice 2009-68), this model language is viewable here.) CCC strongly encourages participants (and alternate payees) to seek the advice of a qualified and trusted financial advisor and/or tax consultant concerning investment and distribution choices.