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401k Plan 401k Rules 401k Rules

Chapter 8: Protections Against Inadequate Plan Funding

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Corporate and Institutional Investors

This chapter describes the rights and responsibilities of the parties and the plan if a spouse, former spouse, child or other dependent seeks a portion or all of your retirement benefits.

These questions are addressed:

Can your retirement benefit be attached for family support?


What requirements must be met for a domestic relations order to be qualified?

Can your retirement benefit be attached for family support?

In general, your retirement benefits cannot be taken away from you by people to whom you owe money. The law makes a limited exception, however, when family support is at stake. Thus, a State authority with jurisdiction over such matters can award part or all of your benefit to your spouse, former spouse, child, or other dependent by issuing a qualified domestic relations order, which must be honored by the plan. The person named in such an order is called an alternate payee. The award can be made in a variety of forms.

What requirements must be met for a domestic relations order to be qualified?

When a plan receives a domestic relations order purporting to divide retirement benefits, it must first determine whether the order is a qualified domestic relations order (QDRO). The order must relate to child support, alimony, or marital property rights and be made under State domestic relations law. To be qualified the order should clearly specify your name and last known mailing address and the name and last known address of each alternate payee. It also must state the name of your plan; the amount or percentage or the method of determining the amount or percentage of the benefit to be paid to the alternate payee; and the number of payments or time period to which the order applies. The order cannot provide a type or form of benefit not otherwise provided under the plan and cannot require the plan to provide an actuarially increased benefit. And if an earlier QDRO applies to your benefit, the earlier QDRO takes precedence over a later one.

In certain situations, a QDRO may provide that payment is to be made to an alternate payee before you are entitled to receive your benefit. For example, if you are still employed, a QDRO could require payment to an alternate payee on or after your earliest retirement age, whether or not the plan would allow you to receive benefits at that time. If you are in the process of a divorce, and a QDRO is being prepared for your family, you may wish to be sure that the QDRO addresses whether a benefit is payable to an alternate payee upon your death and the consequences of the death of the alternate payee.

Source: Department of Labor


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