When a divorcing executive has a non-qualified plan, it is quite likely that it will be involved in the division of marital assets. This is because the value of a non-qualified plan is significantly greater than the value of qualified retirement plans the individual may also have.
It is usually necessary for the executive to communicate directly with the plan administrator to facilitate the division of the plan. While some plans may have written procedures for the handling of domestic relations orders, you may also run into plans that have strict anti-alienation provisions which do not allow benefits to be paid to anyone else during the executive’s lifetime.
When a non-qualified plan allows distributions to a former spouse under a domestic relations order (DRO), the required information usually mirrors a QDRO. For instance, the DRO should include:
- the former spouse’s name, address and date of birth
- the amount or percentage of benefits assigned
- the number and form of payments
- the source of benefits, if applicable
- the name of the plan
Keep in mind that when dealing with non-qualified plans, you should not expect that any two are alike. It is critical to invest the time to understand all aspects of the plan before deciding how to proceed with the division of marital property. We have experience with all types of non-qualified plans and can become as involved as you may need, from a brief general conversation to the drafting of customized agreement language to safely secure your clients interest.