In general, the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) do not permit a participant to assign or alienate the participant's interest in a retirement plan to another person (see Standard Clause, Plan Language, Non-Assignability of Benefits). These anti-assignment and alienation rules ensure that a participant's benefits are available to provide financial support during the participant's retirement years. One of the limited exceptions to the anti-assignment and alienation rules allows a participant's interest in a retirement plan to be assigned to other individuals under a qualified domestic relations order (QDRO) in certain situations, such as a marital separation or divorce.

The plan administrator is responsible for determining whether any domestic relations order (DRO) received purporting to divide a participant's benefits is a QDRO. To be a QDRO, a DRO must contain specific information and is prohibited from providing certain types of benefits. The plan administrator must carefully review each order to ensure that it satisfies all the requirements.

As a plan fiduciary, the plan administrator must perform its duties, including making a QDRO determination, prudently and solely in the interest of plan participants and beneficiaries. In addition, the plan administrator must comply with specific requirements under ERISA and the Code applicable to the division of retirement plan benefits. If a valid QDRO is not honored or if an invalid DRO is honored, the plan administrator could face liability for the incorrect determination. Employers must be careful in dealing with DROs because often the company itself is the plan administrator.

This Toolkit provides several continuously maintained resources designed to assist a retirement plan administrator in reviewing and approving DROs relating to the division of retirement plan benefits.