• What is a Qualified Domestic Relations Order?
• What is an alternate payee?
• When can an alternate payee receive payment under QDRO?

Can your retirement benefit be attached for family support?
In general, your retirement benefits cannot be taken away from you by people to whom you owe money. The law makes a limited exception, however, when family support is at stake. Thus, a State authority with jurisdiction over such matters can award part or all of your benefit to your spouse, former spouse, child, or other dependent by issuing a qualified domestic relations order, which must be honored by the plan. The person named in such an order is called an alternate payee. The award can be made in a variety of forms.

What requirements must be met for a domestic relations order to be qualified?
When a plan receives a domestic relations order purporting to divide retirement benefits, it must first determine whether the order is a qualified domestic relations order (QDRO). The order must relate to child support, alimony, or marital property rights and be made under State domestic relations law. To be “qualified” the order should clearly specify your name and last known mailing address and the name and last known address of each alternate payee. It also must state the name of your plan; the amount or percentage — or the method of determining the amount or percentage — of the benefit to be paid to the alternate payee; and the number of payments or time period to which the order applies. The order cannot provide a type or form of benefit not otherwise provided under the plan and cannot require the plan to provide an actuarially increased benefit. And if an earlier QDRO applies to your benefit, the earlier QDRO takes precedence over a later one.

In certain situations, a QDRO may provide that payment is to be made to an alternate payee before you are entitled to receive your benefit. For example, if you are still employed, a QDRO could require payment to an alternate payee on or after your “earliest retirement age,” whether or not the plan would allow you to receive benefits at that time. If you are in the process of a divorce, and a QDRO is being prepared for your family, you may wish to be sure that the QDRO addresses whether a benefit is payable to an alternate payee upon your death and the consequences of the death of the alternate payee.

This chapter is about the rules that require employers to adequately fund their retirement plans. The following questions are answered:

• What rules govern how employers fund plans?
• Are there penalties for under funding a plan?
• Are employers subject to sanctions if they accidentally under fund a plan?

What are the funding standards for plans?
ERISA sets minimum funding rules to provide that sufficient money is available to pay promised benefits to you when you retire. Funding rules establish the minimum amounts that employers must contribute to plans in an effort to ensure that plans have enough money to pay benefits when due. The rules are applicable primarily to defined benefit plans and also to money purchase plans.

Defined benefit plans generally fund future benefits over time. The plans consider probable investment gains and losses and make assumptions about factors such as future interest rates and potential workforce changes. ERISA provides detailed funding rules to protect the plan from financing methods that could prove inadequate to pay the promised benefits when they are due.

ERISA provides severe sanctions against an employer who fails to meet the funding obligations. Any employer who fails to comply with the minimum funding requirements is charged an excise tax on the amount of the accumulated funding deficiency, unless the employer receives a waiver of the minimum funding requirements. This tax is imposed whether the under funding was accidental or intentional. Certain actions can also be taken by the Department of Labor and the Pension Benefit Guaranty Corporation to enforce the minimum funding standards.

In the case of defined benefit plans that are less than 90 percent funded, you must be notified each year about the plan’s funding status and PBGC’s guarantees.

• What happens if your plan terminates without enough money to pay the benefits?
• If your plan terminates before you are vested, will you lose your benefits?
• Under what circumstances is your benefit guaranteed by the government?
• Can your benefits be reduced as the result of a merger?

Can a plan be terminated?
Although retirement plans must be established with the intention of being continued indefinitely, employers may terminate plans. If your plan terminates or becomes insolvent, ERISA provides some protection. In a tax-qualified plan, your accrued benefit must become 100 percent vested immediately upon plan termination, to the extent then funded. If a partial termination occurs in such a plan, for example, if your employer closes a particular plant or division that results in the termination of a substantial portion of plan participants, immediate 100 percent vesting, to the extent funded, also is required for affected employees.

What happens if your plan terminates without enough money to pay the benefits? Which benefits are guaranteed?
If your terminated plan is a defined benefit plan insured by the Pension Benefit Guaranty Corporation, the PBGC will guarantee the payment of your vested pension benefits up to the limits set by law. Benefits that are guaranteed or that exceed PBGC’s limits may be paid depending on the plan’s funding and on whether PBGC is able to recover additional amounts from the employer. For further information on plan termination guarantees, write to the Pension Benefit Guaranty Corporation, Administrative Review and Technical Assistance Department, 1200 K Street, N.W., Washington, D.C. 20005, telephone 202.326.4000.

If a plan terminates and the plan purchases annuity contracts from an insurance company to pay benefits in the future, plan fiduciaries must take certain steps to select the safest available annuity. Thus, in accordance with Department of Labor guidance, the plan must conduct a thorough search with respect to the financial soundness of insurance companies that provide annuities, to better assure the future payment of benefits to participants and beneficiaries.

Is your accrued benefit protected if your plan merges with another plan?
Your employer may choose to merge your plan with another plan. If your plan is terminated as a result of the merger, the benefit you would be entitled to receive after the merger must be at least equal to the benefit you were entitled to receive before the merger. Special rules apply to mergers of multiemployer plans, which are generally under the jurisdiction of the PBGC.