The U.S. Department of Labor issued an Interim Final Rule, effective April 6, 2007, applicable to Qualified Domestic Relations Orders (QDROs). The rule applies to the QDRO provisions of both ERISA Section 206(d) and the Internal Revenue Code Section 414(p). The Rule is issued to fulfill a requirement under the Pension Protection Act of 2006 (PPA), that the Secretary of Labor issue within one year of enactment of the PPA (by Aug. 17, 2007) rules clarifying that the following will not jeopardize the qualified status of an otherwise qualified domestic relations order:
- Amendment of an existing order (even if previously qualified) between the same parties
- Issuance of a new order with a new alternate payee after another QDRO exists
- The timing of issuance of an order (e.g., after divorce, after death, or after the pension begins)
The new rule does not change the existing requirement that a domestic relations order cannot require:
- a type or form of benefit or a payment option not otherwise available under the Plan; or
- payment of a benefit already assigned to another alternate payee.
Illustrative examples in the new rule cover very limited fact-specific situations, the most notable of which relates to post-death orders. The post-death example involves an order issued after the employee’s death (while employed) to correct the defects in an order issued before death. The rule indicates that the post-death timing of the order is not fatal to the qualification of the order, provided all other QDRO requirements are met. The rule does not include an example where the first order is issued after death.
The rule provides minimal clarification. The Department of Labor is requesting comments on the new rule, and in particular, whether additional scenarios should be included as examples. Reed Smith will be submitting comments and can submit comments on your behalf.