Employee Benefit Plans
The Employee Retirement Income Act of 1974 (ERISA) is a federal statute that dictates how employee benefit plans provided by private employers are administered. ERISA rules do not ordinarily allow pension assets to be assigned or alienated; however, one major exception applies when a pension plan participant becomes separated and divorced. In such a case, pension assets may be subject to a property division under a court order or court approval of a settlement agreement.
In relation to a proceeding in which a state's domestic relations law applies, such as a divorce, separation or child support, a court may issue a judgment, decree or order dividing the property of the parties or ordering alimony payments. Alternatively, the court may issue an order approving a settlement agreement reached by the parties as to how their property is to be divided. Pension benefits may be included within that property even though the spouse or child who is to share in (or take all of) those benefits is not a participant or beneficiary of the pension plan. For the purposes of ERISA, such a judgment, decree, or order is referred to as a "domestic relations order," and the non-participant spouse or child is referred to as an "alternate payee."
A plan administrator is not required to comply with a domestic relations order unless it is determined that the order is "qualified." In order to be qualified, a domestic relations order must contain the name and last known mailing address of the participant and of the alternate payees. The order must also supply the name of the plan to which it applies, the dollar amount to be paid to the alternate payee or the method by which the amount is do be determined, and the number of payments the alternate payee is to receive or the time period to which the order applies.
A qualified domestic relations order may not require payment of any benefit that would not ordinarily be available under the plan, nor must the order require increased benefit payments. If benefits are required to be paid to another alternate payee under a previous qualified domestic relations order, the same benefits may not be ordered paid to another alternate payee. Finally, a qualified domestic relations order may not specify that the benefit is to be paid in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her later spouse.
Plan administrators are required to establish written procedures for determining whether a domestic relations order is qualified. When plan administrators receive a qualified domestic relations order from a state court or agency, they are required to notify plan participants and alternate payees and provide them with a copy of those procedures. The procedures are also required to allow an alternate payee to designate a representative to receive notice of the receipt of the domestic relations order and a copy of the procedures.
If the alternate payee is a child or otherwise legally incompetent, a guardian, agent, or trustee may be designated to receive the benefit payments.
Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.
