102 KAR 1:320 Qualified domestic relations orders

Link to law: http://www.lrc.ky.gov/kar/102/001/320.htm
Published: 2015

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      102 KAR 1:320. Qualified domestic relations orders.

 

      RELATES TO: KRS 161.220, 161.716,

403.190, 26 U.S.C. 414(p)

      STATUTORY AUTHORITY: KRS 161.310(1),

161.700(4)

      NECESSITY, FUNCTION, AND CONFORMITY: KRS

161.310(1) requires the Board of Trustees of the Kentucky Teachers’ Retirement

System (KTRS) to promulgate administrative regulations for the administration

of the funds of the retirement system. KRS 161.700(4) requires the Board of

Trustees of KTRS 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 KTRS who terminates employment in a KTRS 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, KTRS 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 payments under Option A, Option B, or Option C;

      (h) The amount of the participant’s

monthly retirement allowance or termination refund to be paid by KTRS to the

alternate payee as either:

      1. A fixed dollar amount; or

      2. The percentage calculated under

Section 7(1) or (2) of this administrative regulation;

      (i) When payments shall begin;

      (j) When payments shall cease;

      (k) That the alternate payee shall be

paid in the same form as the participant;

      (l) 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;

      (m)Who shall be responsible for payment

of the KTRS processing fee; and

      (n) All information required on the

Qualified Domestic Relations Order to Divide Kentucky Teachers’ Retirement

System Benefits.

      (2) A QDRO shall be:

      (a) Approved by KTRS 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 KTRS 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 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 KTRS

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, 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 KTRS

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 KTRS

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 KTRS, 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 KTRS Authorization for Release of Information form with the

request.

      (3)(a) For a QDRO directed to an active

account from which a participant is not currently receiving a retirement

allowance, KTRS shall forward a KTRS Report for Current Year Earnings and Contributions

form to the participant’s employer upon receipt of the written request and

release.

      (b) The employer shall return the

completed form to KTRS within ten (10) work days.

      (4) If the QDRO is directed to an account

from which the participant is not currently receiving a retirement allowance,

KTRS shall not project future earnings or future service. KTRS 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 KTRS 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.

      (5) If the participant has retired, KTRS

shall provide the amount of the participant’s monthly retirement allowance 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. KTRS

shall not decide whether, or if, any portion of the participant’s account is

marital and potentially subject to division.

      (6) The participant or alternate payee or

legal counsel shall submit a Qualified Domestic Relations Order to Divide

Kentucky Teachers’ Retirement System Benefits form to KTRS for review forty-five

(45) days prior to filing the QDRO with the court. If more than one (1) of

participant’s accounts is subject to classification and division as marital

property, a separate QDRO shall be issued for each KTRS account.

      (7) KTRS shall not review the QDRO unless

it is accompanied by the following:

      (a) The KTRS Administrative Regulatory

Compliance form, which has been approved by both the participant or alternate

payee or their legal counsel;

      (b) A fifty (50) dollar 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 KTRS 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) KTRS 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

KTRS Military Service Certification and Affidavit form, with a copy of

discharge papers.

      (8) Within twenty (20) days of receipt of

the QDRO, KTRS shall notify the participant and alternate payee in writing

whether the QDRO meets KTRS requirements. If the QDRO meets KTRS requirements,

KTRS 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. KTRS shall forward a W-4P Withholding Certificate

for Pension or Annuity Payments form to the alternate payee.

      (9) If the QDRO does not meet KTRS

requirements, KTRS 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 KTRS for review and

approval prior to filing with the court.

      (10) KTRS shall reject any QDRO entered

by a court which has not been reviewed or approved by KTRS prior to its

submission to the court. KTRS shall notify the participant, the alternate

payee, or their legal counsel, and the court in writing, identifying those provisions

which are not in compliance and the amendments needed to bring the QDRO into

compliance before it shall be accepted by KTRS.

      (11) If the QDRO is subsequently amended

before filing with the court, the amended QDRO shall be resubmitted to KTRS

with a twenty-five (25) dollar 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 KTRS.

      (a) The QDRO shall not become effective

until the certified copy is received by KTRS.

      (b) Upon receipt of the certified copy,

KTRS 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) Payments to the alternate payee shall

commence in the calendar month following the date that a certified copy of the

QDRO is received by KTRS, if the alternate payee has supplied a correctly

executed W-4P Withholding Certificate for Pension or Annuity Payments form.

      (13) If KTRS is enforcing a QDRO which 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 KTRS 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 KTRS of any change in name, mailing address, or banking

information.

      (a) KTRS shall provide a Name or Change

of Address form or Authorization for Direct Deposit form upon request.

      (b) KTRS 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 paragraphs (a) and (b) of this subsection, KTRS 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 KTRS of an address change, within sixty (60) days of the

return of the notification to the alternate payee, the amounts otherwise payable

to the alternate payee shall be paid to the participant until a new address is

provided by the alternate payee.

      (e) KTRS shall have no liability to the

alternate payee with respect to amounts paid to the participant.

      (16) The participant shall be responsible

for notifying KTRS in writing of an event which causes benefit payments to the

alternate payee spouse, child, or other dependent, to cease.

      (a) The participant shall provide KTRS

with a certified copy of the alternate payee’s death certificate or marriage

certificate.

      (b) The alternate payee shall also be

responsible for notifying KTRS 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) KTRS shall not be responsible for

payments made to the alternate payee until it is given timely written notice 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 KTRS 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 KTRS service credit through

the date of retirement.

      (b) The resulting fraction shall be

converted to a percentage which shall be divided by two (2).

      (2)(a) In the case of 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 KTRS 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 KTRS service credit as

determined by KTRS 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 which 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 which 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 which 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, KTRS

shall reduce the amount to be paid to the alternate payee under the QDRO by the

amount of the discounts.

      (b) KTRS shall increase the amount paid

to the alternate payee in 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, but payment to the alternate payee shall be measured as

though the participant had chosen Option I, Straight Life Annuity with Refundable

Balance, under KRS 161.620 and 102 KAR 1:150.

 

      Section 8. Any person who attempts to

make KTRS 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 KTRS for its costs and legal fees.

 

      Section 9. Incorporation by Reference. (1)

The following material is incorporated by reference:

      (a) "KTRS Authorization for Release

of Information", 15 January 2013;

      (b) "KTRS Report for Current Year

Earnings and Contributions", 14 July 2010;

      (c) "Qualified Domestic Relations

Order to Divide Kentucky Teachers’ Retirement System Benefits", 14 March

2014;

      (d) "KTRS Administrative Regulatory

Compliance", 14 July 2010;

      (e) "KTRS Confidential Information",

14 January 2013;

      (f) "KTRS Authorization for Direct

Deposit", 14 July 2010;

      (g) "KTRS Military Service

Certification and Affidavit", 14 July 2010;

      (h) "KTRS Name or Change of Address",

14 July 2010;

      (i) "Change of Option Following

Termination of Marriage", 15 February 2002;

      (j) "Change of Beneficiary",

February 2002;

      (k) "Designation of Beneficiary for

KTRS Life Insurance Benefit", 15 January 2013;

      (l) "Designation of Beneficiary for

KTRS Retirement Account Balance", 15 January 2013; and

      (m) "W-4P", 2013.

      (2) This material may be inspected,

copied, or obtained, subject to applicable copyright law, at Kentucky 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/w4p.pdf. (37 Ky.R. 606; Am.

989; Am.1170; eff. 11-8-2010; 39 Ky.R. 1901; 2149; eff. 5-31-2013; 40 Ky.R.

2321; 2675; eff. 7-7-2014.)