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.)