There are a few non-traditional aspects with regard to drafting an IBM Retirement Plan QDRO. Most IBM employees participate in both the IBM Retirement Plan, a defined benefit plan, and the IBM Tax-Deferred Savings Plan (TDSP), a defined contribution plan. Each plan requires a separate QDRO. However, the IBM Retirement Plan has three (3) components that also need to be addressed. The retirement plan is comprised of a core benefit, a Personal Retirement Provision (PRP), and a Pre-Retirement Spouse Protection (PRSP). Again, these components are covered under the IBM Retirement Plan only and are separate from the IBM TDSP plan.With regard to the IBM Retirement Plan, the attorney should specify that the order pertains to both the core benefit and the personal retirement provision along with specifying that the Alternate Payee is entitled to the Pre-Retirement Spouse Protection. If there is no language addressing the PRSP survivor benefit, the Alternate Payee will not receive any benefits should the Participant pre-decease their retirement. Under the order, the Alternate Payee can be assigned an independent interest where the benefit will be based on the Alternate Payee’s life expectancy as opposed to the Participant. That is, with an independent interest, should the Participant die during retirement, the Alternate Payee will still retain their benefit. The Alternate Payee, in effect, becomes a Participant under the plan. This applies to the core benefit and could be actuarially reduced to reflect a longer life expectancy depending on the gender and age of the Alternate Payee.
The Personal Retirement Provision under the IBM Retirement Plan can be cashed out. In other words, the IBM Retirement Plan QDRO can specify a lump-sum distribution for the PRP component, and the core benefit, along with the Pre-Retirement Spouse Protection, would still remain in effect. The PRP is similar to the IBM Tax-Deferred Savings Plan in that it is simply a savings component of the plan. The Attorney cannot assume that the PRP will be included if it is not mentioned in the Order!
In addition, the Order must spell out how the distribution is to be made, or the appropriate forms (a, b, or c) must be obtained from the IBM QDRO Unit and submitted along with the Order. One additional note, should the Alternate Payee elect to receive benefits prior to the Participant retiring, they, the Alternate Payee, will forfeit future increases and lose any right to early retirement benefits/incentives should the Participant receive any after the Alternate Payee commences their benefit.
There are several other factors to be considered, such as if the Participant’s benefit is in pay-out status, or what forms are necessary to accompany the Order, each of which go beyond the scope of this article. However, look for our future articles to address these issues. In addition, there are other plans out there with similar characteristics which ought not to be overlooked. Model Orders provided by the company do not offer much relief in protecting either party. Our firm has observed model orders that would not provide for survivor benefits to the Alternate Payee or some that may not allow the Participant to recoup what was lost should the Alternate Payee die, among several other provisions. Avoid having your client visit your office several years from now in search of their awarded benefit. And of course, always send to the plan administrator a proposed draft first prior to obtaining the court’s signature and seal.
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