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There are three provisions to protect spouses under ERISA:
1) The plan must offer a joint and survivor annuity to the spouse. This may be waived in writing by the spouse.
2) Assuming they have been married at least one year, the plan must also offer a Qualified Pre-retirement Survivor Annuity to pay the surviving spouse of a participant an annuity if the participant dies before retiring.
3) If the couple is divorced, the plan must allow the non-participant spouse to be an Alternate Payee, qualifying for benefits under the plan either as a survivor or Alternate Payee (Qualified Pre-retirement Survivor Annuity or Joint and Survivor Annuity).
Note: If the participant has remarried, the QDRO must be approved by the plan prior to retirement in order for the non-participant spouse to be assured of receiving a qualified Joint and Survivor Annuity.
Duties of the Plan:
There are two primary duties of a plan governed by ERISA:
First they must “promptly” notify the parties that the DRO has been received and determine whether it is qualified within a reasonable period of time. They must then notify the participant and Alternate Payee of the qualified or non-qualified status.
The second primary duty is to “separately account for the amounts that would be payable to an Alternate Payee” during the period in which the status of a DRO is being determined. If the DRO meets the plan’s and ERISA’s requirements, then benefits are paid as outlined. Note that the 18-month segregation period referred to in ERISA begins when the first payment is due following receipt of the DRO by the plan, not when the order is received by the plan.
Plan Features:
Different plans have different requirements for obtaining benefits. Some plans demand a choice be made by the Alternate Payee at the time the QDRO is entered. Other plans may allow them to take a “wait and see” approach and make a choice at a later date, for instance, when the participant retires.
ERISA requires that a plan provide four documents that are extremely useful in creating a QDRO. They are:
¨ The text of the plan
¨ Summary Plan Description
¨ The Plan’s written QDRO procedures
¨ Annual benefit statement
While the text of the plan is the ruling document in case of a conflict between the text of the plan and any booklet or handouts, it is actually the least useful of these four documents. The full text can act as a reference.
The Summary Plan Description provides the most important features of the plan document in easier to understand language. It contains an accurate and comprehensive description of the rights and duties of beneficiaries and participants. Read the section outlining rules for QDROs, divorce and survivorship. If any part of this raises questions, consult the full text of the plan.
The annual benefit statement provides yearend projected or actual benefits. If the plan is a defined contribution plan, an actual value is given. For the defined benefit plan (pension plan) the statement gives the amount of the lump sum or monthly amount expected at retirement. Request statements for the past three or four years in order to check for any withdrawals made from the plan.
For a defined benefit plan, the pension estimate will include assumptions for future continued employment and raises. The increase in benefit value following the divorce is not part of the divorce estate, thus figures in this statement will not be the current value unless the participant is very near retirement.
Normal Retirement Age is the earlier of the date specified in the plan or age 65 (assuming the individual has worked for the employer for at least 5 years).
Earliest Retirement Age is the earlier of the date of separation from service (if he quits before retirement age) or the date on which the participant is first entitled to receive a distribution from the plan for retirement. The Alternate Payee usually begins receiving payments under a QDRO at the Earliest Retirement age, whether or not the participant is retired.
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