EBSA Issues Final Rule on DROs

June 10, 2010 (PLANSPONSOR.com) – The Department of Labor’s Employee Benefit Security Administration has issued a final rule clarifying certain issues relating to the timing and order of domestic relations orders (DROs).

Under ERISA, plan administrators are given an 18-month period to determine whether a DRO meets the requirements of a qualified domestic relations order (QDRO).  After that time, a QDRO is carried out prospectively.  

However, in the Pension Protection Act of 2006, Congress instructed the Secretary of Labor to issue regulations to clarify that a domestic relations order otherwise meeting the requirements to be a QDRO shall not fail to be treated as a QDRO solely because the order is issued after, or revises, another domestic relations order or QDRO; or because of the time at which it is issued.  

EBSA notes that in the case of a DRO that is issued after or revises another DRO or QDRO, the DRO fails to be a QDRO if it assigns benefits already assigned to another alternate payee under another QDRO.   

The EBSA gave examples in its interim regulations that a plan administrator cannot disqualify a DRO because it is issued after a participant’s death or annuity starting date In the case of a DRO issued after a participant’s annuity starting date, the plan is merely required to pay a portion of the benefit otherwise due to the participant to another person, EBSA said. Any domestic relations order received by a plan after the original annuity starting date of the participant that would require reannuitization with a new annuity starting date would fail to be a QDRO, unless the plan specifically provides for such an option.  

The rule provides guidance to plan administrators, service providers, participants, and alternate payees on the QDRO requirements under ERISA, and is effective on August 9, 2010.  

In response to comments the EBSA said it will update its educational handbook ‘‘QDROs—TheDivision of Pensions Through Qualified Domestic Relations Orders’’ available at http://www.dol.gov/EBSA/publications  

The full text of the final rule is here.