Gary Nagler Gary A. Nagler & Associates, PLLC July 5, 2007

1. QDRO’s – From The ABC’s to the PPA – General Overview, Current Developments, Special Situations and Other Misconceptions Gary Nagler Gary A. Nagler & Associates, PLLC July 5, 2007

2. WHAT IS A DOMESTIC RELATIONS ORDER (DRO)? • A judgment, decree or order, made pursuant to a state’s domestic relations or community property law, which relates to the provision of child support, alimony, or marital property rights to a spouse, former spouse, child or other dependent of a plan participant • Established as a result of the Retirement Equity Act of 1984, for the protection of spouses from the loss of pension benefits to which they may be entitled • Pursuant to Code §414(p) and ERISA §206(d)

3. WHAT IS A QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)? • A DRO that meets certain requirements specified under the law, is order by the appropriate court, and is approved by the Plan Administrator

4. WHAT PLANS REQUIRE A QDRO? • Defined Benefit Plans • Defined Contribution Plans • 403(b) Tax Sheltered Annuity Plans • 457 State/Local Government Deferred Compensation Plans

5. WHAT PLANS DO NOT REQUIRE A QDRO? • IRA’s • SEP’s • SIMPLE’s • Non-Qualified Plans • Governmental (Federal, state, local or political subdivision) Plans

6. QDRO STATUTORY REQUIREMENTS • Name and address of participant and alternate payee • Name of plan to which order applies • Amount of alternate payee account/benefit • Manner of determination of alternate payee account/benefit • Duration of payment.

7. QDRO ADMINISTRATIVE REQUIREMENTS • Investment return • Loans • Vesting • Commencement • Death Benefits

8. WHAT ELSE IS NEEDED IN A QDRO? • Enforcement against plan administrator • Release of plan • Court retains jurisdiction • Maintaining addresses

9. WHAT MAY A QDRO NOT ORDER? • Cannot require plan to provide any type or form of benefit or option not otherwise provided in the plan • Cannot require plan to provide increased benefits determined on the basis of actuarial value

10. WHAT ELSE MAY A QDRO NOT ORDER? • Cannot require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another QDRO • Cannot order payment of the alternate payee’s benefit in the form of a joint and survivor annuity to the alternate payee and a subsequent spouse

11. WHEN MAY BENEFITS COMMENCE? • Primarily dependent on plan provisions • Secondarily dependent on the provisions of the QDRO • Can always require payment on or after the date on which the participant attains the earliest retirement age • Earliest retirement age is the earlier of the date of entitlement to a distribution, or the earlier of attainment of age 50 or the earliest date the participant could begin receiving benefits if he/she terminated

12. FORM OF QDRO • Custom drafted • Risk of required changes • Benefit of pre-certification • Use of model language or order • Hierarchy of focus – plan administration, then participant, then alternate payee

13. NEW DEVELOPMENTS –PPA 2006 • DOL directed to issue regulations addressing subsequently issued QDRO’s • Regulations issued 5/7/07: • Subsequent DRO may change division of benefits before payments commence • Subsequent DRO is a QDRO notwithstanding existence of prior QDRO to another alternate payee as long as benefit to be assigned is available

14. NEW DEVELOPMENTS –PPA 2006 • Regulations issued 5/7/07: • Subsequent DRO after 18 month segregation period starts new 18 month period • If DRO has defects, corrective order can be qualified as QDRO even after death • DRO’s issued after divorce can still treat the ex-spouse as the surviving spouse for death benefits

15. WHAT ARE THE “NORMAL” TYPES OF QDROS? • Defined Contribution Plans (P/S, 401(k), MP, ESOP) • Otherwise known as account balance plan • Divide account balance either by percentage or amount • Primarily dependent on plan provisions

16. WHAT ARE THE “NORMAL” TYPES OF QDROS? • Defined Benefit Plans • Contribution unknown • Monthly or annual benefit derived by formula at retirement age • Independent or separate interest approach • Shared interest approach

17. DEFINED BENEFIT QDRO’s – SEPARATE INTEREST • Adjusts the amount of award to be paid over the lifetime of the alternate payee, not the participant • Amount of the benefit is converted to a payment based on the age of the alternate payee • Actuarial equivalence issues • Alternate payee and participant may choose different commencement dates • If alternate payee predeceases, benefit may revert • Not always permitted by particular plan

18. DEFINED BENEFIT QDRO’s – SHARED INTEREST • Benefits are adjusted over the lifetime of the participant • Requires death benefit language both pre- and post-retirement in the event the participant predeceases • If alternate payee predeceases, benefit reverts • Only method permitted if the participant has already retired and is in pay status • Participant must begin receiving benefits for the alternate payee to receive benefits

19. SPECIAL DEFINED BENEFIT ISSUES • Subsidized benefits • Cost of living adjustments • Post-retirement increases • Lump sum payments • Death benefits • Plan investment return

20. GENERAL PROBLEMS/ISSUES • Correct name of plan • Correct type of plan • Division date • Loan issues • Subsequent contributions in DC plan • Benefit formula changes in DB plan

21. SPECIAL ISSUES • Same Sex QDRO’s – Not qualifiable as a QDRO, even if sponsor extends benefits

22. SPECIAL SITUATIONS & MISCONCEPTIONS • Defined Benefit vs. Defined Contribution Plans – Understanding the Difference • Language used for various issues • Methodology of split • Forms of payment • Timing of payment • Death Benefits

23. SPECIAL SITUATIONS & MISCONCEPTIONS • Cash Balance Defined Benefit Plans • Account balance notwithstanding defined benefit nature • Difficulty in ascertaining nature of plan, and need to know!

24. SPECIAL SITUATIONS & MISCONCEPTIONS • 403(b) and 457 Plans • ERISA 403(b) v. non-ERISA 403(b) • 457(b) Eligible v. 457(f) Ineligible

25. SPECIAL SITUATIONS & MISCONCEPTIONS • Defined Benefit Plans • Specifying alternate payee account in the form of a lump sum • Special considerations • Plan rules