Foreign QDRO

[Guest renhark]

Will a domestic relations order issued in another country (i.e., Canada) be effective in the United States. Section 414(p) of the Internal Revenue Code requires that to qualify as a domestic relations order, the order must be issued pursuant to a State domestic relations law. Thanks!

[QDROphile]

You might consider having the Canadian judgment domesticated if you are really worried about it. All or most states have procedures for domesticating foreign judgments. While you are at it, have the court recite that it is acting pursuant to state domestic relations law or has duly taken into consideration state domestic relations law.

I am not so sure you need to go so far, but I don't know.

[david rigby]

We'll leave such legal opinions to QDROphile and other attorneys. However, before acting as he suggested, just who are you? If you are "the plan" or a TPA etc, then you have nothing to do. If the participant asks you, then suggest he/she (or the attorney) read this thread.

[Just Me]

Well, gee, it seems like the "plan" would want to know this, particulaly if the "plan" is being drafted and the employer knows that it has non-US citizens who may obtain a divorce somewhere other than Las Vegas (like maybe in Canada or Mexico). Seems like 414(p) limits it to orders issued by a State only (i.e. the U.S.). (And, by the way, this very same defintion is now being used under Section 409A for nonqualified deferred compensation plans as an exception to the anti-acceleration rule - so lots of "plans" should care.)

But that's ....... Just Me.

[JDuns]

As QDROphile indicated, a participant may file a foreign divorce decree with a US court. The order would then satisfy the requirements for a DRO that could be qualified. The Canadian counsel would need to hire US counsel to file the order.

In my opinion, a qualified plan may not honor a foreign decree unless it has been domesticated.

[Belgarath]

Just idle curiosity here - if you had to guess, for a sort of "plain vanilla" QDRO dividing up a profit sharing plan 50/50, how much would the attornies fees be? I'm just wondering at what level does the entire account balance get eaten by such fees, if the plan is charging them against the participant's account?

And, is there any alternative to two attorneys and a court filing if it is a small account balance? I don't see one, but just wondered. (Other than the attorneys in the divorce exercising some common sense and dividing up another asset rather than the qualified plan.)

[JDuns]

I have no idea of the fees involved the one time I had to look at this issue.

If the account balance is small, I would push strongly to divide the other assets so that the participant keeps the entire US plan benefit. It is only where the assets are a significant portion of the marital estate that the additional expense is worth it.

My answer was focused on the costs to the AP/P and not to the plan. I agree with QDROphile that the plan's cost should not be charged to the participant's account.

[QDROphile]

While I agree that domestication has a cost, I don't see how charging the plan account as anything to do with it. The plan is not involved in the domestication. I don't think the cost of processing a foreign order coupled with the domestication order should be different from processing a domestic order. Of course, any order could be a mess that increases the processing cost.