DOL Issues Final Rules on Timing, Ordering of Domestic Relations Orders

June 17, 2010

On June 10, 2010, the DOL issued final regulations on the timing and ordering of domestic relations orders (DROs). The rules provide helpful guidance, primarily through examples, in clarifying several issues that have confused plan administrators, participants, and alternate payees for years. The final regulations will become effective August 9, 2010.


Under the Internal Revenue Code and ERISA, a participant’s benefit in a qualified retirement plan may not be assigned or alienated, except in very limited circumstances. One exception is that a retirement benefit may be assigned to the participant’s spouse, former spouse, child, or other dependent (alternate payee) pursuant to a legal order as a result of the participant’s divorce or separation. These orders are known as qualified domestic relations orders (QDROs).

A QDRO is generated for consideration by a state domestic relations court and reviewed by the plan administrator for compliance with the federal law and the terms of the plan. The QDRO may be a separate document or part of the divorce decree. It is considered valid as long as it includes the following:

  • Full names, and last known mailing address of the participant and alternate payee.
  • Name of the retirement plan.
  • Amount or percentage payable to the alternate payee, or method to be used to calculate such amount.
  • Number of payments or time period to which the order applies.

A QDRO may not require the plan to:

  • Pay a benefit to an alternate payee in a form that is not available under the plan.
  • Assign benefits previously assigned to an alternate payee under another QDRO.
  • Provide increased benefits, such as by recalculating benefit payments after they have already begun (unless the plan specifically permits this).

Over the years, there has been confusion among plan administrators and benefits professionals over how to administer or even recognize QDROs under certain circumstances, including:

  • QDROs issued after a participant’s death.
  • QDROs issued after benefits have begun to be distributed.
  • QDROs that modify a previous QDRO.

New Final Regulations

Under the Pension Protection Act of 2006, Congress instructed the DOL to issue regulations to clarify how the rules apply in situations where (i) a QDRO is issued after a previous QDRO has already been received by the plan with respect to a participant and (ii) the time at which a QDRO is issued occurs after another event, such as the death of the participant, the participant’s benefits have commenced, etc.

Subsequent Domestic Relation Orders

Under the final rules, a DRO will not fail to be a QDRO solely because it is issued after, or revises another, QDRO. For example, a second QDRO is valid under the final rules if it is issued for the same participant and alternate payee as the first QDRO, and the second QDRO either reduces or increases the benefit payable to the alternate payee. Also, a second QDRO is valid if it involves the same participant and a new alternate payee (e.g., second spouse), and the second QDRO assigns to the new alternate payee benefits not already assigned to the first alternate payee.

Timing of Domestic Relations Orders

A DRO will not fail to be a QDRO solely because of the timing of when it is issued, as long as it otherwise complies with the QDRO rules.

This includes situations where the plan administrator was not notified of the order before the participant’s death. Therefore, a DRO presented to the plan administrator for the first time after the participant’s death may be treated as a QDRO as long as it complies with all other QDRO requirements. Similarly, a former spouse may submit an order as a QDRO requesting payment of surviving spouse benefits, even though he or she is no longer the deceased participant’s spouse.

In addition, a DRO issued after benefit payments have begun to the participant may still qualify as a QDRO. For example, assume a participant retires and begins to receive benefits in the form of a single life annuity equal to $1,000 per month. If, subsequent to the commencement of benefits, the participant and spouse divorce and present the plan with a DRO requiring 50% ($500) of the participant’s future monthly annuity to be paid to the spouse, the validity of the QDRO will not be compromised.

However, if the DRO required payments to the spouse for the lifetime of the spouse, this would invalidate the previous QDRO because it would cause the plan to re-annuitize the retirement benefit, rather merely allocating to the spouse a portion of the annuity payments otherwise payable to the participant.

Plan administrators should review their written QDRO procedures to ensure compliance with the final regulations. Please contact one of the authors or any other member of our Employee Benefits team if you have any questions concerning the matters discussed in this article or need assistance in connection with your plan.

This legal update was included in the Profit Sharing/401k Council of America Executive Report on June 21, 2010.