2003 U.S. Pension Benefit Guaranty Corporation
excerpt from Pension Benefit Guaranty Corporation
The Pension Benefit Guaranty Corporation (PBGC) is a federal agency that insures the benefits of about 44 million men and women in more than 30,000 private-sector defined benefit pension plans.
A defined benefit pension plan that does not have enough money to pay benefits may be terminated if the employer responsible for the plan faces severe financial difficulty, such as bankruptcy, and is unable to maintain the plan. In such an event, PBGC becomes trustee of the plan and pays pension benefits, subject to legal limits, to plan participants and beneficiaries.
The benefits of a pension plan participant generally may not be assigned or alienated. The law provides an exception for domestic relations orders that relate to child support, alimony payments, or marital property rights of an alternate payee (a spouse, former spouse, child, or other dependent of a plan participant). The exception applies only if the domestic relations order meets specific legal requirements that make it qualified, that is, a qualified domestic relations order, or "QDRO."
PBGC reviews a domestic relations order that has been submitted to PBGC and must determine that the order is qualified before being able to pay benefits to an alternate payee.
PBGC QDRO Requirements
Identity of the plan participant, each alternate payee, and each pension plan. A QDRO must specify the name and last known mailing address of the plan participant and each alternate payee covered by the order. A QDRO also must identify the name of each plan to which the order applies -- this should be the plan's formal name.
Amount to be paid and when payments start. A QDRO must state how much of the plan participant's benefit is to be paid to the alternate payee, such as a dollar amount or percentage of the benefit, or make clear the manner in which the amount is to be determined. A QDRO also must specify or allow the alternate payee to choose when payments to the alternate payee will start.
What happens on the death of the plan participant and the alternate payee. A QDRO should specify whether the alternate payee will be treated as the participant's spouse for purposes of any survivor benefits. A QDRO also should specify what happens to benefits when the alternate payee dies.
For more information, including model QDROs, see the website of the Pension Benefit Guaranty Corporation.
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