IRS offers some QDRO help.

The Pension Benefit Guaranty Corporation already has issued sample language to help make sure qualified domestic relations orders (QDROs) are in full compliance with pension plans under its authority (see "QDROs Made Simple," JofA, Jan.97, page 11). Now, the Internal Revenue Service has done the same. The Small Business Job Protection Act of 1996 assigned the IRS the task of developing model language. Notice 97-11 (published as part of IRS bulletin 1997-2) provides both a description of key issues and model language. The Department of Labor, which shares QDRO enforcement authority with the IRS, reviewed the service's language and found it consistent with its view of the statutory requirements. Use of the IRS language is not necessarily required to create a legal QDRO, however, and its use does not guarantee the QDRO will be in compliance. However, the sample language will help ensure QDROs are prepared correctly

QDROs are a thorny issue for CPAs and lawyers. They can be used to divide a 401(k), for example, at the time of divorce. The language must be absolutely correct--a problem the new IRS guidance hopes to alleviate. But one problem that any sample language can't solve is the QDRO's inability to override a plan's rules. "For example," David Rooney, CPA, told the Journal, "if a 401(k) plan allows only for lump-sum, 10-year installments or lifetime annuities, you can't have a QDRO calling for monthly payments to a spouse." Rooney, a partner of Rooney, Plotkin & Wiley in Newport, Rhode Island, consults frequently with lawyers who draft QDROs for their clients. "Most defined contribution plans contain a clause saying they will make payments pursuant to any QDRO, but if that statement isn't there," said Rooney, "the QDRO may not supersede the plan rules."

Issues for CPAs and lawyers

Rooney emphasized the role CPAs could play in helping lawyers draft QDROs. Although CPAs themselves may not draft them, Rooney does provide "language for counsel's consideration" which usually, after review, is adopted verbatim. He said CPAs and lawyers should review at least the summary plan description. He personally looks at the entire plan document.

"The IRS language is helpful although we do not simply use boiler-plate in drafting QDROs," Jeffrey Weinstock, a divorce lawyer with the Washington, D.C., firm of Sherman, Meehan, Curtin & Ain, told the Journal. He agreed with Rooney that it was a good idea to look at the entire plan document.