11.9 Equitable Distribution of Retirement Plans

• Library: Virginia Law and Practice: A Handbook for Attorneys (Virginia CLE) (2020 Ed.)

11.9 EQUITABLE DISTRIBUTION OF RETIREMENT PLANS

11.901 Court's Authority. Pensions, profit-sharing plans, deferred compensation plans, and retirement benefits, which constitute marital property are subject to equitable distribution. This is true whether the plans are vested or nonvested and whether they are payable as a lump sum or over a period of time. ¹¹⁵

The court may order the direct payment of a percentage of the marital share by direct assignment to a spouse from the employer trustee, plan administrator or other holder of the benefits. However, the court may only direct that payments be made as the benefits are payable. Also, the payment

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cannot exceed 50 percent of the marital share of the cash benefits actually received by the spouse against whom the award is made. ¹¹⁶

In addition, the court may order a party to designate a spouse or former spouse as an irrevocable beneficiary during the lifetime of the beneficiary of all or a portion of any survivor benefit or annuity plan. However, this does not include coverage by a life insurance policy. If there are costs associated with providing a survivor annuity, the court can apportion the costs between the parties. ¹¹⁷

11.902 Employer-Sponsored Retirement Plans.

A. Employee Retirement Income Security Act (ERISA). ¹¹⁸ ERISA applies to employer-sponsored retirement plans that are established or maintained (i) by any employer engaged in commerce or in any industry or activity affecting commerce; (ii) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or (iii) both. However, ERISA does not apply to any of the following:

1.	Governmental plans;
2.	Church plans;
3.	Workers' compensation or unemployment compensation;
4.	Plans maintained outside of the United States primarily for the benefit of nonresident aliens; and
5.	Excess benefit plans. 119

It is the Internal Revenue Code (I.R.C.) that determines whether employer-sponsored retirement plans are qualified and subject to ERISA. ¹²⁰ The retirement plans subject to division are referred to as employee pension

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benefit plans. Employee pension benefit plans include defined contribution plans and defined benefit plans.

ERISA is administered by the United States Department of Labor (DOL), the Internal Revenue Service (IRS), the United States Treasury Department (DOT), and the Pension Benefit Guaranty Corporation (PBGC). However, it is the Employee Benefits Security Administration (EBSA) of the DOL that has jurisdiction to interpret § 206(d)(3) of ERISA and § 401(p) of the Internal Revenue Code relating to the division of qualified employer-sponsored retirement plans in divorce. The contact information for the Employee Benefits Security Administration is as follows:

U.S. Department of Labor
200 Constitution Avenue, NW
Washington, D.C. 20210
Telephone: (866) 444-3272
www.dol.gov/agencies/ebsa

B. Qualified Domestic Relations Orders.

1. Preemption of State Law. ¹²¹ ERISA preempts any state law relating to a plan covered by ERISA. ¹²²

2. Limits on Transfer of Pension Rights. ERISA contains an anti-assignment clause which prohibits the transfer of pension rights to someone else. ¹²³ However, this clause does not apply in divorce cases as long as the benefits are transferred pursuant to a qualified domestic relations order (QDRO). ¹²⁴

3. "QDRO" Defined. QDROs can be part of divorce decrees, property settlement agreements, or separate orders. The text of the statute is set out in its entirety below for the purpose of illustrating what it does not contain:

(i) the term "qualified domestic relations order" means a domestic relations order—

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(I) which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, and

(II) with respect to which the requirements of [29 U.S.C. § 1056(c) and (d)] are met, and

(ii) the term "domestic relations order" means any judgment, decree, or order (including approval of a property settlement agreement) which—

(I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and

(II) is made pursuant to a State domestic relations law (including a community property law). ¹²⁵

4. Required Elements.

A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies—

(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,

(ii) the amount or percentage of the participant's benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,

(iii) the number of payments or period to which such order applies, and

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(iv) each plan to which such order applies. ¹²⁶

These are the only required elements of QDROs. Congress was certainly aware of the types of available benefits under employer-sponsored retirement plans. However, in this statute neither ERISA nor the I.R.C. refers to any type of additional benefits, for example, gains or losses for defined contribution plans or survivorship benefits for defined benefit plans that need to be included in QDROs.

5. Recommended Reading. The following publication on the EBSA website ¹²⁷ is highly recommended: QDROs: The Division of Pensions Through Qualified Domestic Relations Orders. ¹²⁸

In addition, the EBSA website can provide definitions for the different types of defined contribution and defined benefit plans.

11.903 Retirement for Federal Employees. ¹²⁹ Federal employees are covered either by the Civil Service Retirement System or the Federal Employees' Retirement System. ¹³⁰ Both retirement plans are governed by the United States Office of Personnel Management. The contact information for OPM is as follows:

U.S. Office of Personnel Management
1900 E. Street, NW
Washington, D.C. 20415
Telephone...