IRS offers some QDRO help.
The Pension Benefit Guaranty Corporation Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation).
Pension Benefit Guaranty Corporation already has issued sample language to help make sure qualified domestic relations orders Qualified Domestic Relations Order (QDRO)
A judgment, decree, or order that gives a pension plan participant access to retirement assets that must be used to pay an ex-spouse or dependent children. (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 An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. 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 See Qualified Domestic Relations Order. 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 (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , 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 Newport is a city in Newport County, Rhode Island, United States, about 30 miles (48 km) south of Providence. It is the home of Naval Station Newport, housing the United States Naval War College, the Naval Undersea Warfare Center, and a major United States Navy training center. , consults frequently with lawyers who draft QDROs for their clients. "Most defined contribution plans Defined contribution plan
A pension plan whose sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: Defined benefit plan 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 To obliterate, replace, make void, or useless.
Supersede means to take the place of, as by reason of superior worth or right. A recently enacted statute that repeals an older law is said to supersede the prior legislation. 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.