Defined Benefit - Cash Balance Plan Under this type of plan, the employee receives pension credits each year, which are based upon a set percentage of his/her annual income. This continues each year until the employee retires or terminates employment. Additionally, the employee’s cash balance account is credited with annual investment earnings that are set by the plan at a specified annual rate of return. The employee has no say in how the account is invested because the money earmarked for each employee is not actually segregated from the money earmarked for all other employees; rather it is maintained in a general pension fund. Because of the predetermined nature of the plan, it is considered to be a defined benefit pension plan.
Understanding the Cash Balance Plan

General Questions to be Answered:

  1. Name, address and phone number of the person requesting the order.
  2. Name of the county in which the divorce is taking place.
  3. Name of the court that has jurisdiction over the divorce.
  4. Name of judicial district/circuit/division, if applicable.
  5. Case reference number.
  6. Name, address, date of birth and Social Security number of the employee (participant/member of the plan).
  7. Name, address, date of birth and Social Security number of the employee’s spouse (alternate payee/former spouse).
  8. Reason for order (marital property rights or alimony).
  9. Date of marriage.
  10. Date the marriage ended.
  11. Date of divorce, if divorced.
  12. Date the employee began participating in the plan, if prior to the date of marriage.
  13. Is the employee still employed, terminated or retired?
  14. The exact name of the pension plan.

Additional Questions to be Answered:

    (Explanations are included with these questions)
  1. What is the form of award to the alternate payee (percent or dollar amount)?
  2. Some companies establish a new cash balance defined benefit plans having never previously sponsored a traditional defined benefit plan. Other companies have converted their traditional defined benefit plan to a cash balance defined benefit plan. You must determine if this plan is a conversion in order to have the QDRO approved by the plan administrator.
  3. If the plan is a conversion, where the parties married prior to the conversion?
  4. If the alternate payee dies prior to commencement of benefits, what happens to his/her share?

Additional Provisions that will be included in the QDRO:

  1. Share of Opening Account Balance (if applicable)
  2. Share of Contributions and Interest Credits
  3. Interest Credits on Alternate Payee’s Share of Account Balance
  4. Amount of Alternate Payee’s Benefit and Duration of Payments
  5. Commencement Date and Form of Payment to Alternate Payee
  6. Death of Alternate Payee
  7. Death of Participant
  8. Savings Clause
  9. Certification of Necessary Information
  10. Continued Qualified Status of Order
  11. Tax Treatment of Distributions Made Under The Order
  12. Constructive Receipt
  13. Effect of Plan Termination
  14. Continued Jurisdiction
  15. Actions by Participant
  16. Notice of Pending Retirement (if applicable)

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