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NRAs and QDROs


Guest Ken_Systems

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Guest Ken_Systems

How should a qualified DC plan treat a "QDRO" that an NRA participant undergoes?

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Not sure what you mean by a "QDRO that a participant undergoes".

Not aware of any exception to the QDRO rules for non-resident aliens. The answer seems to be that the plan sponsor has the same responsibilities as in the case of any other QDRO:

1. Make sure the DRO is a QDRO.

2. Abide by the terms of the QDRO.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Guest Ken_Systems

A Non-Resident Alien employee who is allowed to participate in the plan.

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Good call Pax. I agree. If the DRO is determined to be a QDRO and is filed in a U.S. court, the plan must abide by it's terms.

I'm no attorney, but if a DRO comes from a foreign court the plan may be able to ignore it. If it did come from a foreign court, you should check with an attorney.

The ironic thing about allowing expatriates to participate in U.S. pension and welfar plan, they have to take the good eith the bad just like us colonists.

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Guest PeterGulia

A court is a QDRO only if, along with other requirements, the order is a domestic. ERISA provides that a domestic relations order is an order "made pursuant to a State domestic relations law ...." ERISA 206(d)(3)(B)(ii)(II); see also IRC 414(p)(1)(B)(ii).

ERISA defines the term State to include "any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, and the Canal Zone." ERISA 3(10). The IRC provides only that the term State "shall be construed to include the District of Columbia where such construction is necessary to carry out provisions of [the Code]." IRC 7701(a)(10).

If a State court recognizes a foreign nation's judgment in a marriage or similar domestic relations matter and makes its own order consistent with the State's domestic relations law, that State court order might be a DRO that can be determined to be a QDRO.

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good question Kip. but the anwswer is probably very simple: the state court issues a valid order that attaches (and explains if necessary) the foreign order.

However, it seems unprofessional and unlikely that any judge (other than one who is extremely lazy) would ever do that.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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  • 17 years later...

re-upping this very old post, as we have had a question (thankfully not on a plan we administer) with this precise question. How would a Plan Administrator normally be expected to handle a divorce decree from, say, Canada? Let's say the plan sponsor and the business is located in New York, for example. Non-resident alien gets divorce in Canada. Can a Plan Administrator typically choose to allow the Canada divorce decree as a QDRO if it otherwise satisfies normal requirements as to information/form/timing, or must the PA require something from a New York court?

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Thanks. So taking it one step further, do you know (in a general way) what the process would be to take the Canada divorce decree and get it acknowledged or reorderd/reissued/approved or whatever the terminology might be, as a DRO sanctioned by the state of New York? Is that a process that would typically require an ERISA attorney, or could any good divorce attorney handle it?

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In order for a "foreign" DRO to be a QDRO in this country, a party (usually the Alternate Payee) would have to "file" an action in a "domestic" domestic relations court to enforce the terms of the foreign divorce and DRO - then the domestic court would issue it's OWN DRO (which is now a domestic order of a court of competent jurisdiction) that could be given effect against the plan.

I can't say I've seen it happen myself, but I know of others who have and while not common, not unheard of either. A similar situation exist if the parties are in different states. An "Ohio" DR court will enforce a "Florida" DR (or other states) order but usually it requires filing an action of some sort "locally" to give the court jurisdiction. Happens ALL THE TIME with respect to child support and/or visitation issues. Same principle, except in the case at hand in this thread, it would be to enforce a foreign court's order - which would need to be turned into a domestic DR court DRO to be given effect.

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So, just a follow-up - I relayed this to the attorney who originally asked the question.

He said that he understands the response, but is faced with this specific problem: Whatever state he and the plan sponsor are located in does not provide for non-residents (turns out that they are both citizens of Great Britain, who worked in or for a U.S. Company and participated in the 401(k)) to be able to "file" under state domestic relations law. So there is apparently this twilight zone where a divorce decree can't be enforced as a QDRO, and it can't ever become a QDRO because the State domestic court won't permit a non-resident to "file."

And please understand that I'm not an attorney, so I may be getting the appropriate terminology wrong! But you get the gist.

Seems like there has to be a way around this, but that's ultimately the attorney's problem. I'm just interested. He said he's seen many instances where the Plan Administrator just approved the payout as a "QDRO" without ever questioning it, but in this case, the Plan Administrator, reasonably, is saying they cannot approve it 'cause it isn't even a DRO.

Good stuff!

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