Qualified Domestic Relations Orders
(QDROs)

Steps for Processing QDROs

Step 1 – Participant's Role

Although it's not required, the participant should let you know of changes in family status such as marriage or divorce as well as keep you informed of any change in address. It will make your job easier when there are QDROs and/or distributions to process.

Step 2 – Notification of Receipt

As Plan Administrator, you must have procedures in place to process a domestic relations order when it is received and determine if it is a QDRO. You make the final determination as to whether the order is a QDRO. You should consult your plan attorney when making this determination.

Once you receive a domestic relations order, you need to notify, in writing, the participant and the alternate payee named in the order. The notification should inform the participant that he or she cannot receive any installment payments, withdrawals or loans from his or her account until the status of the order is determined. A sample transmittal letter (Letter 1) follows. This letter is for illustration purposes only. You may want to review it with your plan attorney.

Letter 1 – Notification of Domestic Relations Order Receipt

From the Plan Administrator to the plan participant and alternate payee named in the order.
[Date]
[Address]

Re: Domestic Relations Order Relating to the Benefits of [Participant's name] under the [Name of plan (e.g., ABC Firm Profit Sharing Plan)]

Dear [Participant/alternate payee]:

On [Date] the firm received a domestic relations order. The order may be a qualified domestic relations order (QDRO) within the meaning of Section 206(d)(3)(B)(i) of the Employee Retirement Income Security Act of 1974 (ERISA) and Section 414(p) of the Internal Revenue Code. If the Plan Administrator determines that the order is a QDRO, it will affect the payment of benefits to which the participant may be entitled. A QDRO provides for payment of all or a portion of the participant's interest under the plan to one or more persons identified as "alternate payees" in the order.

You are receiving this letter because you are one of the following:

  • the participant whose benefits will be affected if the order is found to be a QDRO, or
  • a person identified as an "alternate payee" in the order, or a representative of one of the above.

You will be notified of the Plan Administrator's decision as to whether the order is a QDRO after that review is complete. The plan's procedures for determining whether an order is a QDRO are attached.

You cannot receive any installment payments, withdrawals or loans from your account until the Plan Administrator decides the status of the order.

You must keep your mailing address current with this office while the status of the order is being determined. Please be sure that all correspondence and questions concerning the order or the plan's determination procedures are addressed as follows:

[Plan Administrator]
[Name of plan]

ATTN: QDRO Determination Procedure
[Address]

Sincerely,
[Plan Administrator]
Enclosure[s] [Attach plan's QDRO procedures]

Step 3 – Secure Amounts Payable to Alternate Payee

The secured amounts cannot be preserved for longer than an 18- month period, which begins on the first date the payments would be required to be made under the domestic relations order.

While you are deciding the status of the order, you are responsible for ensuring that amounts that would be payable to the alternate payee, if the order is a QDRO, are not paid to the participant or any other person.

You should direct the ABA Retirement Funds Program (the Program) via mailed letter to stop (or "freeze") any installment payments, withdrawals or loans from the participant's account that may be affected by the order. The participant may continue to reallocate investments and change future contribution amounts and investment direction. The freeze should continue until you have received the signed court order and the order is determined either:

  • To be a QDRO, or
  • Not to be a QDRO.

If the parties have not submitted an order that is a QDRO within 18 months, the freeze is lifted and payment may be made to the participant, unless a court order is issued that prohibits you from making the payment.

While determining the status of a domestic relations order, if the terminated or retired participant is entitled to a payment, only the portion of his or her account balance that is not subject to the order may be paid. If the order is determined to be a QDRO, the amount held back, together with any earnings (if applicable), is paid to the alternate payee. The QDRO may also allow for the amount to be divided and paid at a later date (with or without earnings).

Step 4 – the Program Secures Amounts Payable

After you notify the Program (as directed in Step 3 above) that you have received an order affecting a participant's account, the Program will place a hold on the participant's account, which will prevent loan issuances, in- service withdrawals or distribution of benefits. The secured amounts cannot be preserved for longer than an 18- month period, which begins on the first date the payments would be required to be made under the domestic relations order.

Step 5 – Determine if the Order is a QDRO

A domestic relations order is a judgment, decree, order or approval of a property settlement that:

  • Relates to child support, alimony payments or marital property rights to a spouse (present or former), child or other dependent of a plan participant,
  • Is made under a State domestic relations law, including a community property law, and
  • Meets all the requirements set forth in the procedures.

A "qualified" order is a domestic relations order that:

  • Provides payments to an alternate payee, and
  • Meets certain other requirements (see the checklist under "QDRO Checklist" later in this section).
  • Please note that a court order will not fail to be a QDRO solely because the order is issued after or revises another domestic relations order or QDRO. For example, after a court order allocates a specific portion of a participant's benefits to an alternate payee, a second order between the parties might change the amount to the alternate payee. Moreover, a court order will not fail to be a QDRO solely because of the time at which it is issued. Therefore, as Plan Administrator, you should not reject an order because it is issued after the participant's death, after the parties' divorce or after the participant has commenced receipt of his benefit, as in the case of an annuity.

The checklist under "QDRO Checklist" later in this section will assist you in deciding whether an order is a QDRO. (You may want to make a copy of the checklist, complete it and file it with the participant's domestic relations order.) However, your plan's QDRO procedures should govern. You may also want your plan's ERISA attorney to review the order to decide if it is a QDRO.

Step 6 – Notification of Determination

Within a reasonable amount of time, you will need to notify the participant and alternate payee of your decision as to whether the order is a QDRO. Once you have made this decision, you must notify the participant and the alternate payee in writing. The letter should be sent to the addresses listed in the QDRO. A sample transmittal letter (Letter 2) is provided in this section to be used if the order is a QDRO. Be sure to include copies of the plan's claim and appeal procedures, which are explained in the summary plan description (SPD).

If the order is not a QDRO because it does not satisfy the criteria described previously, you must notify the participant and the alternate payee in writing. You must also include the reason it was not qualified. A sample transmittal letter is included under "Letter 3 – Letter Explaining Order Is Not a QDRO." Remember to include copies of the plan's claim and appeal procedures, which are explained in the SPD. Letter 2 and Letter 3 are for illustration purposes only.

Letter 2 – Letter Explaining Order is a QDRO

[Date]
[Address]

Re: Domestic Relations Order Relating to the Benefits of [Participant's name] under the [Name of plan (e.g., ABC Firm Profit Sharing Plan)]

Dear [Participant/alternate payee]:

On [Date] you were notified that the firm had received an order that appeared to be a qualified domestic relations order (QDRO) as defined in Section 206(d)(3)(B)(i) of the Employee Retirement Income Security Act of 1974 (ERISA) and Section 414(p) of the Internal Revenue Code.

After reviewing the order and all comments sent in connection with it, we have determined that the order is a QDRO. In following the order, the Plan Administrator shall authorize payment under the plan to the alternate payee[s] in the manner and at the time or times specified in the order.

Each alternate payee must notify me of:

  • changes in his or her mailing address, and
  • changes in conditions or status that might, under the order, have an effect on the right of the alternate payee to receive benefits, and other occurrences that may be relevant to his or her plan rights under the order (such as a name change).

Following the plan's procedures described in the enclosed summary plan description, you may file a written claim for a review of my decision that the order is a QDRO. You must file a claim with me within 60 days after you receive this letter. I will process your claim request in accordance with the plan's normal claim and appeal procedures.

Sincerely,
[Plan Administrator]
Enclosure[s]


Letter 3 – Letter Explaining Order IS NOT a QDRO

[Date]
[Address]

Re: Domestic Relations Order Relating to the Benefits of [Participant's name] under the [Name of plan (e.g., ABC Firm Profit Sharing Plan)]

Dear [Participant/alternate payee]:

On [Date] you were notified that the plan had received an order that appeared to be a qualified domestic relations order (QDRO) as defined in Section 206(d)(3)(B)(i) of the Employee Retirement Income Security Act of 1974 (ERISA) and Section 414(p) of the Internal Revenue Code.

After reviewing the order and all comments sent in connection with it, it has been determined that the order is not a QDRO for the reasons noted below:

[Insert appropriate reasons.]

If I receive a revised order, the order will be reviewed in accordance with the procedures of the plan relating to a QDRO.

Following the plan's procedures described in the enclosed summary plan description, you may file a written claim for a review of my decision that the order is not a QDRO. You must file a claim with me within 60 days after you receive this letter. I will process your claim request in accordance with the plan's normal claim and appeal procedures.

Sincerely,
[Plan Administrator]
Enclosure[s]

Step 7 – Complete Qualified Domestic Relations Order Review Sheet Form

Use the Qualified Domestic Relations Order Review Sheet to certify that a domestic relations order for a plan participant is qualified. This form instructs the Program to transfer the specified part of the participant's account balance to an account for an alternate payee.

Instructions for Completing Qualified Domestic Relations Order Review Sheet
A. You complete the employer information that relates to the plan.
B. You complete the participant information.
C. You complete the alternate payee information.
D. You complete the dollar amount or percentage specified in the order. If specified in the order, indicate the investment options (and amounts) from which the funds will be withdrawn. If no funds are specified in the order, then the withdrawal will be made on a pro- rata basis.
E. You sign and date the form.

form 10

Step 8 – Send Information to the Program

Mail a copy of the QDRO and your completed Qualified Domestic Relations Order Review Sheet to the Program at one of the addresses listed under "Mail & E-mail" in the Forms, Tools and Resources section of this Guide.

Steps 9 and 10 – the Program's Role

The Program will process the QRDO upon receipt and send a confirmation notice to the participant and to the alternate payee.

Alternate Payee Distributions

An alternate payee is entitled to a distribution from the plan at the same time the participant is eligible for a distribution. However, the QDRO may allow for an immediate payment from the plan. Distribution Request Form is used by an alternate payee to request a payment from the plan. See "Distributions" under Accessing Funds for more information on instructions for completing the forms, and special tax notice and withholding.