102 KAR 1:320 - Qualified domestic relations orders
RELATES TO: KRS 161.220, 161.700, 161.716, 403.190, 26 U.S.C. 414(p)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 161.310(1) requires the Board of Trustees of the Teachers' Retirement System (TRS) to promulgate administrative regulations for the administration of the funds of the retirement system. KRS 161.700(4) requires the Board of Trustees of TRS to promulgate administrative regulations setting forth the requirements, procedures, and forms for the approval and processing of qualified domestic relations orders impacting the benefits of participants of the retirement system. This administrative regulation establishes these requirements.
Section 1. Definitions.
(1) "Alternate payee" is defined by
KRS
161.220(26).
(2) "Benefits" means a monthly service or
disability retirement allowance or refund payable at the request of a
participant covered by TRS who terminates employment in a TRS covered position
prior to becoming eligible to receive a retirement allowance.
(3) "Member" is defined by
KRS
161.220(4).
(4) "Participant" is defined by
KRS
161.220(24).
(5) "Qualified domestic relations orders" or
"QDRO" is defined by
KRS
161.220(25).
Section 2.
(1) A QDRO shall state the following:
(a) The member's name, TRS member
identification number, and last-known mailing address;
(b) The alternate payee's name and last known
mailing address;
(c) Whether the
order applies to:
1. An active account from
which the member is not currently receiving a retirement allowance;
or
2. A retired account from which
the member is currently receiving a retirement allowance and the date on which
the member retired the account;
(d) The date of marriage;
(e) The date of decree of dissolution of
marriage;
(f) That the order is for
the purpose of property division;
(g) Whether the alternate payee shall
receive:
1. Recurring monthly payments under
Option A, Option B, or Option C; and
2. For an active, contributing participant, a
share of a termination refund of the contributions posted to the participant's
account as either:
a. A fixed dollar amount;
or
b. A percentage calculated under
Section 7(2) of this administrative regulation or as determined by either the
Court or the parties;
(h) When payments shall begin;
(i) When payments shall cease;
(j) That the alternate payee shall be paid in
the same form as the participant;
(k) If the alternate payee spouse shall share
in the participant's cost of living adjustments if the QDRO awards a fixed
dollar amount to the alternate payee;
(l) Who shall be responsible for payment of
the TRS processing fee; and
(m) All
information required on the Qualified Domestic Relations Order to Divide
Teachers' Retirement System Benefits.
(2) A QDRO shall be:
(a) Approved by TRS as to enforceability and
compliance with the requirements of
KRS
161.700 and this administrative
regulation;
(b) Approved and
submitted by the participant and alternate payee or their legal
counsel;
(c) Signed by the judge of
a court of competent jurisdiction;
(d) Filed with the clerk of the court;
and
(e) Certified by the clerk of
the court.
Section
3. Administrative Provisions.
(1) Upon entry of a final divorce decree, the
participant shall forward a copy of the decree to TRS and:
(a) If the participant is a retired member,
request:
1. A Change of Option Following
Termination of Marriage form, if the participant wants to change his or her
retirement option, which shall be done within sixty (60) days of the final
divorce decree;
2. A Change of
Retirement Beneficiary form, if the participant had chosen retirement Option I
or Option II and does not want to change his or her retirement option, but
wants to name a new beneficiary;
3.
A Designation of Beneficiary for TRS Life Insurance Benefit form, if the
participant wants to designate a beneficiary other than his or her estate;
or
4. A W-4P Withholding
Certificate for Pension or Annuity Payments or "W-4P", if the participant wants
to change the amount of federal tax withheld from his or her retirement
benefit; or
(b) If the
participant is an active member, he or she shall request:
1. A Designation of Beneficiary for TRS
Retirement Account Balance form, if the participant wants to designate a
beneficiary other than his or her estate; or
2. A Designation of Beneficiary for TRS Life
Insurance Benefit form, if the participant wants to designate a beneficiary
other than his or her estate.
(2) Thirty (30) days prior to filing the QDRO
with TRS, the participant or alternate payee shall present a written request
for benefits information for divorce purposes. The participant, alternate
payee, or third party, including the party's legal counsel, shall provide a
completed TRS Authorization for Release of Information form with the
request.
(3) For a QDRO directed to
an active account from which a participant is not currently receiving a
retirement allowance, TRS may, for the current fiscal year, provide the
unaudited salary information electronically submitted to TRS by the
participant's employer upon receipt of the written request and
release.
(4) If the QDRO is
directed to an account from which the participant is not currently receiving a
retirement allowance, TRS shall not project future earnings or future service.
TRS shall provide:
(a) The participant's total
accrued service credit, including service credit purchased during the marriage,
and the member account balance, including the total amount of accrued
contributions and interest, as posted at the end of each fiscal year during the
marriage and for which an employer annual report has been received by TRS and
for which the member has not received a refund; and
(b) An estimate of the monthly retirement
allowance the participant would receive if the participant retired without a
statutory reduction of the basic retirement allowance based upon the
participant's final compensation and total accrued service credit as of the
date of dissolution of marriage or receipt of the request for
information.
(5) If the
participant has retired, TRS shall provide the amount of the participant's
monthly retirement allowance, the participant's accumulated account balance at
retirement, the total retirement allowance received to date, and the
participant's total accrued service credit, including any service credit
purchased during the marriage. The parties, their legal counsel, or the court
may use the information to decide what portion of the participant's account is
marital. TRS shall not decide whether, or if, any portion of the participant's
account is marital and potentially subject to division.
(6) The participant, alternate payee, or
legal counsel shall submit a Qualified Domestic Relations Order to Divide
Teachers' Retirement System Benefits form to TRS for review forty-five (45)
days prior to filing the QDRO with the court. If more than one (1) of the
participant's accounts is subject to classification and division as marital
property, a separate QDRO shall be issued for each TRS account.
(7) TRS shall not review the QDRO unless it
is accompanied by the following:
(a) The TRS
Administrative Regulatory Compliance form, or the draft QDRO, which has been
approved by the:
1. Participant or legal
counsel; and
2. Alternate payee or
legal counsel;
(b) A
$300 nonrefundable processing fee, by certified check or on the attorney's
trust account, made payable to the Kentucky State Treasurer, except that a
processing fee shall not be charged for a QDRO issued solely for child
support;
(c) The TRS Confidential
Information form, which shall include the participant's and alternate payee's
address, Social Security number, and date of birth;
(d) Copies of the participant's and alternate
payee's signed Social Security cards;
(e) TRS Authorization for Direct Deposit
form; and
(f) Any other documents
that are required to confirm additional service credit purchased, or sought to
be purchased, for retirement calculation purposes under
KRS
161.220 through
161.716,
including TRS Military Service Certification and Affidavit form, with a copy of
the discharge papers.
(8) Within twenty (20) days of receipt of the
QDRO, TRS shall notify the participant and alternate payee in writing whether
the QDRO meets TRS requirements. If the QDRO meets TRS requirements, TRS shall
approve the QDRO and circulate an original, signed QDRO for signature by the
participant and alternate payee for submission to the court. If the participant
or alternate payee is represented by legal counsel, the approved QDRO shall
instead be provided to their legal counsel for signature by counsel and
submission to the court. TRS shall forward a W-4P Withholding Certificate for
Pension or Annuity Payments form to the alternate payee.
(9) If the QDRO does not meet TRS
requirements, TRS shall notify the participant and alternate payee in writing,
identifying those provisions which are not in compliance and the amendments
needed to bring the QDRO into compliance. If the participant or alternate payee
is represented by legal counsel, this notice shall instead be provided to their
legal counsel. The amended QDRO shall be submitted to TRS for review and
approval prior to filing with the court.
(10) TRS shall reject any QDRO entered by a
court that has not been reviewed or approved by TRS prior to its submission to
the court. TRS shall notify the participant, the alternate payee, or their
legal counsel, and the court in writing, identifying those provisions that are
not in compliance and the amendments needed to bring the QDRO into compliance
before it shall be accepted by TRS.
(11) If the QDRO is subsequently amended
before filing with the court, the amended QDRO shall be resubmitted to TRS with
a $150 nonrefundable processing fee for review and approval.
(12) Following approval by the court, the
participant, alternate payee, or legal counsel shall file a certified copy of
the QDRO with TRS.
(a) The QDRO shall not
become effective until the certified copy is received by TRS.
(b) Upon receipt of the certified copy, TRS
shall designate the participant's account for implementation of the
QDRO.
(c) While a separate account
balance shall not be maintained for the alternate payee, a separate payroll
account shall be established.
(d)
If the participant is a retired member, payments to the alternate payee shall
commence in the calendar month following the date that a certified copy of the
QDRO is received by TRS, if the alternate payee has supplied a correctly
executed W-4P form. If the alternate payee either fails to return the W-4P or
does not correctly execute the form, TRS shall apply the IRS default option of
married with three (3) exemptions, which results in no withholding of federal
tax. If the Alternate Payee chooses a different option and then provides a
correctly executed W-4P, future payments shall be adjusted.
(e) If the participant is an active member,
payments to the alternate payee shall commence in the calendar month in which
the participant begins to receive a monthly annuity, if the alternate payee has
provided his or her current address, a correctly executed W-4P and banking
information as required by subsection (15) of this section. If the alternate
payee either fails to return the W-4P or does not correctly execute the form,
TRS shall proceed in the same manner as described in paragraph (d) of this
subsection.
(f) If the participant
is an active member who withdraws from service prior to eligibility for
retirement and requests a refund of his or her accumulated account balance, the
provisions of
102 KAR 1:060, setting
forth the requirements for processing payment of the refund to the participant
and the alternate payee, shall be followed. If the parties fail to designate
the alternate payee's share of a refund in the QDRO, TRS shall refund the
entire participant's account to the participant in accordance with the
provisions of this administrative regulation and
102 KAR 1:060, and TRS
and its staff shall have no liability for making the refund in this
manner.
(13) If TRS is
enforcing a QDRO that is subsequently amended or terminated by the court, then
either the participant, alternate payee, or legal counsel shall submit a
certified copy of the amended QDRO or order of termination to TRS for
processing.
(14) The participant,
alternate payee, or legal counsel shall not submit a QDRO that is not final and
under consideration by an appellate court.
(15) The alternate payee shall be responsible
for notifying TRS of any change in name, mailing address, or banking
information.
(a) TRS shall provide a Name or
Change of Address form or Authorization for Direct Deposit form upon
request.
(b) TRS shall contact the
alternate payee at the last known mailing address on file to notify the
alternate payee when an annuity benefit subject to the QDRO becomes
payable.
(c) Other than sending a
notice as established in paragraph (b) of this subsection, TRS shall have no
duty or responsibility to search for, or locate, the alternate payee.
(d) If the notification sent to the alternate
payee's last known address is returned due to the alternate payee's failure to
notify TRS of an address change or if the bank notifies TRS that the alternate
payee's account has been closed, within sixty (60) days of the return of the
notification to the alternate payee or receipt of notification from the bank,
the amounts otherwise payable to the alternate payee shall be paid to the
participant until a new address or bank account information is provided by the
alternate payee.
(e) TRS shall have
no liability to the alternate payee with respect to amounts paid to the
participant.
(16) The
participant shall be responsible for notifying TRS in writing of an event that
causes benefit payments to the alternate payee spouse, child, or other
dependent to cease.
(a) The participant shall
provide TRS with a certified copy of the alternate payee's death certificate or
marriage certificate. TRS shall suspend payments due the alternate payee
provided that submission of proof of the death or marriage of the alternate
payee, if marriage terminates payments under the terms of the QDRO, is received
by the beginning of the month following receipt of the participant's written
notification.
(b) The alternate
payee shall also be responsible for notifying TRS in writing of the alternate
payee's remarriage if, under the terms of the QDRO, that is an event that
terminates the alternate payee's right to receive any payments.
(c) TRS shall not be responsible for payments
made to the alternate payee until it is given timely written notice and
documentation of any event terminating those payments.
Section 4. A QDRO may apply to a
participant's:
(1) Retirement
allowance;
(2) Disability
retirement allowance; or
(3)
Termination refund.
Section
5. A QDRO shall not apply to a participant's:
(1) Survivor annuity that becomes payable
after the member's death;
(2)
Survivor benefits that become payable after an active contributing member's
death;
(3) Accounts that are not
vested at the time of the dissolution of marriage;
(4) Life insurance benefit;
(5) Refund as a result of an error;
(6) Refund of an active or retired account in
response to a member's death;
(7)
Health insurance; and
(8) Any other
payment or benefit not described in Section 4 of this administrative
regulation.
Section 6.
If an alternate payee has, under the terms of the QDRO, been awarded a share of
the participant's annuity benefits and dies before the participant dies,
retires, or withdraws his account, the entire remaining account value shall be
restored to the participant.
Section
7. Calculation and Payment.
(1)
(a) If the participant has retired, the
portion of the participant's benefits payable to the alternate payee as a
percentage of the participant's total service retirement allowance, disability
retirement allowance, or refundable account balance, accrued through the date
of dissolution of marriage, that is in excess of the retirement benefits of the
alternate payee as provided under
KRS
403.190(4), shall be
calculated by the following fraction:
1. The
numerator of which shall be the participant's total full and fractional years
of creditable TRS service earned during the marriage, including service credit
purchased during the marriage; and
2. The denominator of which shall be the
participant's total full and fractional years of TRS service credit through the
date of retirement.
(b)
The resulting fraction shall be converted to a percentage that shall be divided
by two (2).
(c) Option C may be
utilized if the duration of the retired participant and the alternate payee's
marriage was less than the participant's total full and fractional years of TRS
service at the date of retirement. The parties or their legal counsel shall
report the marital years in Option C of the QDRO.
(2)
(a) For
an active account, the portion of the participant's benefits payable to the
alternate payee as a percentage of the participant's total service retirement
allowance, disability retirement allowance, or refundable account balance,
accrued through the date of dissolution of marriage, that is in excess of the
retirement benefits of the alternate payee as provided under
KRS
403.190(4), shall be
calculated by the following fraction:
1. The
numerator of which shall be the participant's total full and fractional years
of creditable TRS service earned during the marriage, including service credit
purchased during the marriage, as reported by the parties or their legal
counsel in Option C of the QDRO; and
2. The denominator of which shall be the
participant's total full and fractional years of TRS service credit as
determined by TRS at the time that the participant retires either by service
retirement or disability retirement or requests a refund of his or her account
balance.
(b) The
resulting fraction shall be converted to a percentage that shall be divided by
two (2).
(3) If the
participant is or will be receiving a disability retirement allowance, the
participant's total annuity benefit for purposes of this administrative
regulation shall be calculated under the service retirement formula established
under
KRS
161.661(5), even if the
entitlement period described under
KRS
161.661(3) and (4) has not
expired.
(4) If an alternate payee
has, under the terms of the QDRO, been awarded a share of the participant's
disability retirement allowance that is subsequently discontinued, the
alternate payee shall not receive a benefit. Further, if a participant remains
disabled at the end of his or her entitlement period, pursuant to
KRS
161.661(5), the disability
benefits shall be recalculated and may result in a lower monthly payment to
both the participant and the alternate payee.
(5) If the QDRO is directed to an account
from which the participant is not receiving a retirement allowance, the
participant's total annuity benefit shall be calculated without inclusion of
the discounts required under
KRS
161.620(1)(b) and (d).
(a) If at retirement the participant is
subject to discounts required under
KRS
161.620(1)(b) and (d), and
if the QDRO establishes a set dollar amount to be withheld from the retirement
benefits that are payable to the participant and to be paid to the alternate
payee, TRS shall reduce the amount to be paid to the alternate payee under the
QDRO by the amount of the discounts.
(b) TRS shall increase the amount paid to the
alternate payee in an amount equal to any discounts that are subsequently
eliminated as the result of the participant's return to work after retirement
under the provisions of
KRS
161.605(11), upon the
participant's resumption of receipt of retirement benefits.
(6) If the QDRO is directed to an
account from which the participant is not receiving a retirement allowance, and
the participant at issuance of the QDRO is not eligible for calculation of his
total annuity benefit based on his three (3) highest salaries as provided under
KRS
161.220(9), then his total
annuity benefit shall be calculated on his five (5) highest salaries.
(7) The participant may select any retirement
option.
Section 8. Any
person who attempts to make TRS a party to a domestic relations action in order
to determine an alternate payee's right to receive a portion of the annuity
benefits payable to the participant shall be liable to TRS for its costs and
legal fees.
Section 9.
Incorporation by Reference.
(1) The following
material is incorporated by reference:
(a)
"Teachers' Retirement System Authorization for Release of Information", July
2016;
(b) "Qualified Domestic
Relations Order to Divide Teachers' Retirement System Benefits", January
2019;
(c) "Teachers' Retirement
System Administrative Regulatory Compliance", July 2016;
(d) "Teachers' Retirement System Confidential
Information", July 2016;
(e)
"Teachers' Retirement System Authorization for Direct Deposit", July
2016;
(f) "Teachers' Retirement
System Military Service Certification and Affidavit", July 2016;
(g) "Teachers' Retirement System Name or
Change of Address", July 2016;
(h)
"Change of Option Following Termination of Marriage", July 2016;
(i) "Change of Retirement Beneficiary", July
2016;
(j) "Designation of
Beneficiary for TRS Life Insurance Benefit", July 2016;
(k) "Designation of Beneficiary for TRS
Retirement Account Balance", July 2016; and
(l) "Withholding Certificate for Pension or
Annuity Payments" or "W-4P", 2016.
(2) This material may be inspected, copied,
or obtained, subject to applicable copyright law, at Teachers' Retirement
System, 479 Versailles Road, Frankfort, Kentucky 40601, Monday through Friday,
8 a.m. to 5 p.m.
(3) W-4P may also
be obtained at www.irs.gov/pub/irs-pdf/fw4p.pdf.
Notes
STATUTORY AUTHORITY: KRS 161.310(1), 161.700(4)
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