By Zbranek H.B. No. 413 77R3009 KLA-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to qualified domestic relations orders. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle C, Title 1, Family Code, is amended by 1-5 adding Chapter 10 to read as follows: 1-6 CHAPTER 10. DOMESTIC RELATIONS ORDERS FOR 1-7 CERTAIN PENSION OR RETIREMENT PLANS 1-8 Sec. 10.001. DEFINITIONS. In this chapter: 1-9 (1) "Alternate payee" means a spouse, former spouse, 1-10 child, or other dependent of a member or retiree who is recognized 1-11 by a domestic relations order as having a right to receive all or a 1-12 portion of the benefits payable by a private pension or retirement 1-13 plan with respect to the member or retiree. 1-14 (2) "Domestic relations order" means a judgment, 1-15 decree, or order, including approval of a property settlement 1-16 agreement, that: 1-17 (A) relates to providing child support, spousal 1-18 maintenance payments, or marital property rights to a spouse, 1-19 former spouse, child, or other dependent of a member or retiree of 1-20 a private pension or retirement plan; and 1-21 (B) is made under a domestic relations law, 1-22 including a community property law of this state or another state. 1-23 (3) "Participant" means a member or retiree to whom 1-24 benefits are payable by a private pension or retirement plan. 2-1 (4) "Private pension or retirement plan" means an 2-2 ERISA-qualified employee benefit plan under the Employee Retirement 2-3 Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.). The 2-4 term includes a defined benefit plan or defined contribution plan, 2-5 but does not include a public pension plan provided or administered 2-6 by a public retirement system to an officer or employee of the 2-7 state or a political subdivision of the state or of an agency or 2-8 instrumentality of the state or a political subdivision of the 2-9 state. 2-10 (5) "Public retirement system" has the meaning 2-11 assigned by Section 804.001, Government Code. 2-12 (6) "Qualified domestic relations order" means a 2-13 domestic relations order that: 2-14 (A) creates or recognizes the existence of an 2-15 alternate payee's right or assigns to an alternate payee the right 2-16 to receive all or a portion of the benefits payable with respect to 2-17 a member or retiree under a private pension or retirement plan; and 2-18 (B) directs the private pension or retirement 2-19 plan to disburse benefits to an alternate payee. 2-20 Sec. 10.002. ACCEPTANCE OF CERTAIN DOMESTIC RELATIONS ORDERS 2-21 AS QUALIFIED DOMESTIC RELATIONS ORDERS REQUIRED. A plan 2-22 administrator for a private pension or retirement plan, or another 2-23 person acting in an equivalent capacity for the plan, shall accept 2-24 as a qualified domestic relations order, in lieu of any other 2-25 order, a domestic relations order that is substantially in the form 2-26 provided by Section 10.003. 2-27 Sec. 10.003. FORM OF DOMESTIC RELATIONS ORDER. A domestic 3-1 relations order may be in substantially the following form: 3-2 QUALIFIED DOMESTIC RELATIONS ORDER 3-3 This order is intended to meet the requirements 3-4 for a "qualified domestic relations order" relating to 3-5 a private pension or retirement plan (the "plan"). 3-6 This order is an integral part of the decree of divorce 3-7 granted on ________ (insert date on which divorce was 3-8 granted). 3-9 1. This qualified domestic relations order 3-10 assigns a portion of the benefits payable under the 3-11 plan to _______________ (insert name of alternate 3-12 payee) in recognition of the marital rights of 3-13 __________________ (insert name of alternate payee) in 3-14 the benefits payable to _________________ (insert name 3-15 of participant) under the plan. 3-16 2. The participant in the plan is 3-17 _________________ (insert name of participant), whose 3-18 last known mailing address is __________________ 3-19 (insert participant's mailing address), whose birth 3-20 date is _____________ (insert participant's birth 3-21 date), and whose social security number is 3-22 _____________ (insert participant's social security 3-23 number). 3-24 3. The alternate payee is __________________ 3-25 (insert name of alternate payee), whose last known 3-26 mailing address is __________________ (insert alternate 3-27 payee's mailing address), whose birth date is 4-1 _____________ (insert alternate payee's birth date), 4-2 and whose social security number is ___________ (insert 4-3 alternate payee's social security number). The 4-4 participant and alternate payee were married on 4-5 _____________ (insert date of marriage). 4-6 4. As part of the just and right division of the 4-7 estate of the parties, the alternate payee is awarded a 4-8 portion of any benefits payable with respect to the 4-9 participant that the participant, or the participant's 4-10 designated beneficiary, surviving spouse, or estate, 4-11 may become entitled to receive from the plan as a 4-12 return of accumulated contributions or as any annuity 4-13 or other benefit that may become payable as a result of 4-14 the participant's participation in the plan. 4-15 (OPTION 1. (To be used if the divorce was 4-16 granted before the date of the 4-17 participant's retirement.) 4-18 The portion is computed by multiplying 4-19 ___________ (insert one-half or other proportionate 4-20 share of the community property interest) by a 4-21 fraction, the numerator of which is the amount of 4-22 credited service with the plan earned by the 4-23 participant between _____________ (insert date of 4-24 marriage) and the date the divorce was granted, and the 4-25 denominator of which is the amount of credited service 4-26 by the participant under the plan on the date the 4-27 divorce was granted, and multiplying that product by 5-1 the value of the benefit payable to the participant or 5-2 the participant's designated beneficiary, surviving 5-3 spouse, or estate by the plan, computed as of the date 5-4 the divorce was granted as if the participant were 5-5 eligible to receive the benefit on that date. 5-6 (OPTION 2. (To be used if the divorce was 5-7 granted after the date of the participant's 5-8 retirement.) 5-9 The portion is computed by multiplying 5-10 ____________ (insert one-half or other proportionate 5-11 share of the community property interest) by a 5-12 fraction, the numerator of which is the amount of 5-13 credited service with the plan earned by the 5-14 participant between _____________ (insert date of 5-15 marriage) and the date the divorce was granted, and the 5-16 denominator of which is the amount of credited service 5-17 by the participant under the plan, and multiplying that 5-18 product by the benefit payable to the participant or 5-19 the participant's designated beneficiary, surviving 5-20 spouse, or estate by the plan. 5-21 5. The award to the alternate payee under 5-22 Paragraph 4 of this order is subject to the rules 5-23 provided by this paragraph. 5-24 (A) This order may not be interpreted in any way 5-25 to require the plan to provide any type or form of 5-26 benefit or any option not otherwise provided under the 5-27 plan. 6-1 (B) This order may not be interpreted in any way 6-2 to require the plan to provide increased benefits 6-3 determined on the basis of actuarial value. 6-4 (C) This order may not be interpreted in any way 6-5 to require the plan to pay any benefits to an alternate 6-6 payee named in this order that are required to be paid 6-7 to another alternate payee under another order 6-8 previously determined to be a qualified domestic 6-9 relations order. 6-10 (D) This order may not be interpreted in any way 6-11 to require the payment of benefits to the alternate 6-12 payee before the retirement of the participant, the 6-13 distribution of a withdrawal of contributions to the 6-14 participant as authorized by the statutes governing the 6-15 plan, or other distribution to the participant required 6-16 by law. 6-17 (E) This order shall be interpreted to require 6-18 that, in the event of the participant's retirement 6-19 before normal retirement age, the benefits payable to 6-20 the alternate payee shall be reduced in a proportionate 6-21 amount. 6-22 (F) This order may not be interpreted to require 6-23 the designation of a particular person as the recipient 6-24 of benefits in the event of the participant's death, or 6-25 to require the selection of a particular benefit 6-26 payment plan or option. 6-27 (G) If, after the date the divorce was granted, 7-1 any future benefit increases are provided under or 7-2 required of the plan, the alternate payee shall receive 7-3 a proportionate part of the increase, unless such an 7-4 order would disqualify this order under the rules the 7-5 plan has adopted with regard to qualified domestic 7-6 relations orders. 7-7 (H) If, after the date the divorce was granted, 7-8 the amount of any benefit otherwise payable to the 7-9 participant is reduced by law, the portion of benefits 7-10 payable to the alternate payee shall be reduced in a 7-11 proportionate amount. 7-12 (I) If, as a result of the participant's death 7-13 after the date the divorce was granted, the plan pays 7-14 to the participant's estate, surviving spouse, or 7-15 designated beneficiaries an amount that does not relate 7-16 to the participant's length of employment or 7-17 accumulated contributions with the plan but is purely a 7-18 death benefit paid as a result of employment or retired 7-19 status at the time of death, no portion of that amount 7-20 is community property, and the alternate payee has no 7-21 interest in the death benefit. 7-22 (J) In lieu of paying the alternate payee the 7-23 interest awarded by this order, the plan may pay the 7-24 alternate payee an amount that is the actuarial 7-25 equivalent of: 7-26 (i) an annuity payable in equal monthly 7-27 installments for the life of the alternate payee; or 8-1 (ii) a lump sum. 8-2 (K) All payments to the alternate payee under 8-3 this order terminate on the earlier of the date of the 8-4 alternate payee's death or the date required as a 8-5 result of the retirement option selected by the 8-6 participant. 8-7 6. All benefits payable under the plan, other 8-8 than those payable to the alternate payee under 8-9 Paragraph 4 of this order, are payable to the 8-10 participant in the form and manner that the 8-11 participant, in the participant's sole discretion, 8-12 elects, subject only to the plan requirements. 8-13 7. The alternate payee is ordered to report any 8-14 retirement payments received on any applicable income 8-15 tax return and to promptly notify the plan of any 8-16 changes in the alternate payee's mailing address. The 8-17 plan is authorized to issue a Form 1099R or other form 8-18 required by the Internal Revenue Service on any direct 8-19 payment made to the alternate payee. 8-20 8. The participant is designated as constructive 8-21 trustee for receiving any retirement benefit under the 8-22 plan that is due the alternate payee but paid to the 8-23 participant. The participant is ordered to pay that 8-24 benefit directly to the alternate payee not later than 8-25 the third day after the date the participant receives 8-26 the benefit. All payments made directly to the 8-27 alternate payee by the plan shall be credited against 9-1 the funds required to be paid by this order. 9-2 SIGNED this _____ day of __________, ______. 9-3 9-4 ___________________________ 9-5 JUDGE PRESIDING 9-6 APPROVED: 9-7 _____________________ ___________________________ 9-8 Participant (Participant's counsel, if 9-9 applicable) 9-10 _____________________ ___________________________ 9-11 Alternate payee (Alternate payee's counsel, 9-12 if applicable) 9-13 Sec. 10.004. FAILURE OF PLAN ADMINISTRATOR TO ACCEPT CERTAIN 9-14 QUALIFIED DOMESTIC RELATIONS ORDERS. (a) If a plan administrator 9-15 for a private pension or retirement plan, or another person acting 9-16 in an equivalent capacity for the plan, rejects a domestic 9-17 relations order substantially in the form provided by Section 9-18 10.003 in violation of Section 10.002, the alternate payee may 9-19 report the plan administrator or other person to the secretary of 9-20 state. 9-21 (b) On receipt of a complaint under Subsection (a), the 9-22 secretary of state shall determine, after notice and hearing, 9-23 whether the plan administrator or other person violated Section 9-24 10.002. 9-25 (c) On determining that the plan administrator or other 9-26 person violated Section 10.002, the secretary of state shall 9-27 prohibit the plan administrator or other person from engaging in 10-1 business in this state. 10-2 Sec. 10.005. CAUSE OF ACTION BY ALTERNATE PAYEE. A private 10-3 employer who provides a private pension or retirement plan to an 10-4 employee or retiree is liable in an action brought by an alternate 10-5 payee if: 10-6 (1) the plan administrator or other person acting in 10-7 an equivalent capacity for the private pension or retirement plan 10-8 violated Section 10.002 by rejecting a domestic relations order 10-9 substantially in the form of the order under Section 10.003; and 10-10 (2) as a result of the violation of Section 10.002, 10-11 the alternate payee incurred a pecuniary loss with respect to the 10-12 amount of the benefit payable to the alternate payee under the 10-13 private pension or retirement plan. 10-14 Sec. 10.006. DAMAGES. An alternate payee who prevails in a 10-15 suit under Section 10.005 may recover actual damages and reasonable 10-16 attorney's fees and costs. 10-17 SECTION 2. (a) This Act takes effect September 1, 2001. 10-18 (b) Chapter 10, Family Code, as added by this Act, applies 10-19 only to a domestic relations order submitted to a plan 10-20 administrator for a private pension or retirement plan or other 10-21 person acting in an equivalent capacity on or after the effective 10-22 date of this Act.