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QDRO issue


Guest Gibson

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Guest Gibson

To what extent is a 403(B) plan (with employer contributions and salary reduction) subject to 414(p)? Any other help/advice with respct to domestic relations orders would be appreciated.

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The theoretical answer is, "not at all." But as a practical matter, a 403(B) plan almost always has to comply with a QDRO.

If your plan is subject to ERISA (i.e., it is not a governmental or church plan), section 206(d) of ERISA will impose exactly the same requirements on the 403(B) plan as would apply if it were subject to 414(p). If your plan is not subject to ERISA because it is a governmental or church plan, then it is also not subject to ERISA preemption of state laws (including domestic relations laws). Thus, it might have to comply with a domestic relations order even if that order did not meet the requirements of a QDRO.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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If the 403(B) arrangement is not an ERISA plan because the employer is not involved, the employer and its representatives should not get involved in any way with the domestic relations order. Orders are often submitted to the employer. At most, the order should be forwarded as a courtesy to the annuity provider(s), preferably with a disclaimer to the person who submitted the order. It would also be reasonable to return the order. [Edited by QDROphile on 08-08-2000 at 04:00 PM]

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I'd agree with you on that one. My original response was based on Gibson's statement that the 403(B) plan in question had employer contributions as well as salary reduction. Thus, it would already be subject to ERISA (barring governmental or church plan status), regardless of what it did with QDROs.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Guest Gibson

In our case, the employer does contribute and is not exempt from ERISA based on governmental or church plan status. Accordingly, if I correctly understand what you are saying, we are subject to ERISA Section 206(d) and have to comply with the Order (provided it satisfies the statutory requirements). Correct? Thank you.

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Yes, that is correct.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Guest Gibson

Thanks for your replies. One more question. How do 414(p)(9) and 414(p)(10) factor into my analysis? It seems that those provisions make the Code applicable to my case, although I cannot determine to what extent.

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Code sections 414(p)(9) and (10) rules do not impose 414(p) on 403(B) plans. Rather, they merely deal with the consequences of a situation in which a 403(B) plan complies with a QDRO based on ERISA section 206(d).414(p)(9) says that the taxation of the distribution will be the same as if it were a 414(p) distribution. 414(p)(10) says that a 403(B) plan will not be considered to be in violation of the restrictions on distributions due to compliance with a QDRO.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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PLR 9619040 is helpful. The IRS can view the individual as the "plan administrator" for purposes of determining the qualification of a DRO in a non-ERISA plan. So 414(p)(10) protects the annuity if it honors a QDRO, and the Service will allow the policyholder to act as the plan administrator for such purposes. The downside, of course, is that, should the DRO be seen on audit as not being qualified, you arguably can have an improper distribution fromthe plan.

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