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QDROs: Nonqualified plans comply?


Guest RW

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I don't think so. See 414(p)(9) and 401(a)(13). But don't overlook 414(p)(11) special language for govt. and church plans.

[This message has been edited by pax (edited 03-29-2000).]

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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How do you explain Guzy v. Ameritech Corp, May 1999? I personally don't agree with that court's finding. I don't have the case cite.

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By definition, qdros apply to qualified plans. However, employers may infact use them to divide excess plan benefits, even though the taxation will be to the participant.

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Nonqualified benefits can arguably be paid and taxed to former spouses in community property states.

In common law states, the benefits would be taxable to the employee-spouse but the couple may enter into tax-reimbursement arrangements as part of the divorce.

Note that the tax treatment of splitting options and nonqualified deferred compensation as part of a divorce is on the Treasury's 2000 business plan.

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A nonqualified plan that is an ERISA "top hat" plan or "excess benefit" plan, while exempt from most of ERISA's substantive requirements, is still subject to ERISA's administration and enforcement provisions. These include the ERISA preemption provision, which preempts the enforcement of a state court domestic relations order ("DRO") unless it satisfies ERISA's definition (not the Code's definition) of a qualified domestic relations order ("QDRO"). Accordingly it may be argued that a DRO that is not an ERISA QDRO is unenforceable against such plans, even though ERISA's definition of a QDRO is set forth in the general anti-alienation requirement, with respect to which such plans are exempt. The logic of this view was adopted by the Third Circuit in Kemmerer v. ICI, 70 F.3d 281 (3d. Cir. 1995), cert den'd.

Phil Koehler

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