Retirement Accumulations in Divorce
In providing this overview and the attached prototype for Qualified Domestic Relations Orders (QDROs), TIAA-CREF is not providing legal, tax or investment advice, and will not be held liable for errors or omissions in QDROs received.
Please review all materials with counsel.
Overview: Different stages of the retirement experience require different approaches as do the various types of obligations the QDRO is being devised to satisfy. In general, these materials contemplate a marital property distribution of significant accumulations in the pre-payout (deferred annuity) stage.
See Part 3 for contracts in payout (immediate annuity) status, and for accumulations where preserving tax deferral is not the driving concern. See Part 4 for child support /alimony obligations. Interests in IRAs can be distributed by the divorce decree, however the law requires the obtaining of a separate court order "QDRO" to distribute interests in employer sponsored retirement plans. The following frequently asked questions are separated into questions more frequently asked by the participant or the non-participant spouse (alternate payee), but all sections should be reviewed by both.
Part 1: Questions Participants Ask About Deferred (Pre-payout) Annuity Splits
- How do I start the process?
- Does notice to TIAA-CREF that a property distribution proceeding is pending act as an automatic restraint on the participant’s rights e.g. right to transfer, or cash withdrawals if available; right to select a payout option; right to take loans or change a beneficiary? How do these activities impact the implementation of the QDRO?
- How long will it take to complete the contract split process?
- What "valuation date" is used to split the deferred annuity contracts?
- According to the terms of the QDRO, a certain dollar amount was awarded but the amount transferred differs. Why is there a difference?
- How is a retirement loan treated in a divorce split?
- What aspects of the property distribution process result most frequently in litigation?
- What will happen if an appeal is filed after the division of the annuities?
Part 2: Questions Alternate Payees Ask About Deferred (Pre-payout) Annuity Splits
- Can the funds awarded to me be distributed directly to an existing IRA in my name?
- What are the tax consequences of cash withdrawals and/or settlements from the awarded contracts?
- Can I reallocate how the awarded funds are invested?
- When can I receive a distribution/rollover from the funds?
- Do I have to complete an enrollment form to open my contracts?
- Can I add funds to my new awarded contracts?
Part 3: Questions About Immediate or Payout Annuity Contracts
- Will the funds that are awarded to me be subject to minimum distribution requirements each year, even if I am not yet 70½?
- As to annuity contracts already in pay-out status, why do I need to complete the tax withholding election form W4-P?
Part 4: Spousal and Child Support QDROs
Part 1: Questions Participants Ask About Deferred (Pre-payout) Annuity Splits
- A sample QDRO may be downloaded from the following links and completed with the required information. The selection of the QDRO should reflect the contract’s status (pay-in/deferred annuity or pay-out/immediate annuity) which require different versions of the QDRO.
- For those in the accumulation or pre-payout stage — separate interest distribution:
- For those who wish to split an IRA in the deferred stage:
- For those receiving annuity income:
- For those who wish to split a Transfer Payout Annuity (TPA), Interest Only (IO), or Minimum Distribution Option (MDO) contract:
- Under the employer sponsored retirement plan contract prototype sample we’ve provided, the alternate payee will receive separate contracts in his or her name, based on how the accumulations are divided in the QDRO.
- Some employers require pre-screening of the QDRO or even their own form. You may contact us to determine if your current or former employers have special requirements.
- When the court enters the QDRO in the record, submit a certified copy to TIAA-CREF, P.O. Box 1259, Charlotte, NC 28201-9910.
- If the time for appeal under local laws has not expired, please notify TIAA-CREF as soon as possible, but no later than within 30 days, of any intent by either party to appeal this judgment.
- We will begin the division process, which takes four to six weeks, provided all documents are in good order. If alternative award dates are used, or if TIAA-CREF requires additional documents before we can affect the annuity split, this will cause a significantly longer period of time to elapse before the award is completed.
- If you have questions, you may call our counselors at 800 842-2776 weekdays from 8 a.m. to 10 p.m. (ET) and Saturdays from 9 a.m. to 6 p.m. (ET).
Does notice to TIAA-CREF that a property distribution proceeding is pending act as an automatic restraint on the participant’s rights e.g. right to transfer, or cash withdrawals if available; right to select a payout option; right to take loans or change a beneficiary? How do these activities impact the implementation of the QDRO? Until receipt of a restraining order or court entered QDRO, TIAA-CREF cannot restrict any type of ownership activity by the participant. Upon receipt of a restraining order or QDRO, we will disallow these activities until the QDRO is implemented. Because other participants have experienced significant problems in their property distribution negotiations, we caution participants from pursuing such activity while their proceedings are pending. We will implement the QDRO to the extent of the funds available in the accounts when the QDRO is received. The balance has to be worked out amongst the claimants.
Transactions entered into after the valuation date specified in the QDRO will be allocated solely to the participant’s account except for MDO elections and loans.
Obtaining the written consent of the spouse in exercising ownership options while the marital property distribution is pending is useful and in some instances required. Such consent is required during the marriage for REACT-governed accumulations; in other instances some plans require spousal consent for some transactions. To find out whether your accumulations are governed by REACT call our counselors at 800 842-2776 weekdays from 8 a.m. to 10 p.m. (ET) and Saturdays from 9 a.m. to 6 p.m. (ET).
How long will it take to complete the contract split process?Using the prototype provided above expedites the matter. We ask for your patience—please allow us four weeks to complete the transfer. You can obtain a status update online in the Recent Activity area of your account. If the transfer has not completed after four weeks, please call us at 800 842-2252 weekdays from 8 a.m. to 10 p.m. (ET) and Saturdays from 9 a.m. to 6 p.m. (ET). If division dates prior to the date of transfer are specified in the QDRO or the documentation received is insufficient, that will delay implementation of the order.
To check recent activity on your account:
- Log in to your Account profile.
- Click the Manage My Portfolio tab.
- Select Recent Activity.
According to the terms of the QDRO, a certain dollar amount was awarded but the amount transferred differs. Why is there a difference? If the effective division date is prior to the date of transfer, the deferred annuity accumulation amounts transferred from TIAA Traditional will reflect interim interest earned until the split is completed. However, the TIAA Real Estate and CREF accounts are variable accounts and may increase or decrease in value from one day to the next. As such, the amounts transferred will reflect the interim investment experience of the variable account(s).
How is a retirement loan treated in a divorce split? We can’t split retirement contracts where accumulations are needed to secure (as collateral) an outstanding loan. It may be more appropriate to transfer other TIAA-CREF contract assets, or other property, in lieu of an interest in a loan contract. Please check your quarterly statement for outstanding loan information.
What aspects of the property distribution process result most frequently in litigation? The biggest issue we see is the failure to update and maintain current beneficiary designations on all insurance and annuity products while the proceeding is pending and afterwards. Interim beneficiary designations on all retirement annuities and insurance policies should be reviewed with your attorneys. Before the dissolution of marriage, TIAA-CREF will distribute pre-retirement death benefits in compliance with the provision of the Retirement Equity Act (REACT).1
What will happen if an appeal is filed after the division of the annuities? After the division of annuities, if TIAA-CREF receives a formal notice of the filing of an appeal, withdrawals and transfers from the affected accounts will be prohibited until the appeals process is completed. Any successful appeal will be implemented only to the extent of the options and accumulations available at the time of receipt of an amended QDRO.
Part 2: Questions Alternate Payees Ask About Deferred (Pre-payout) Annuity Splits
Can the funds awarded to me be distributed directly to an existing IRA in my name? Not directly since these are retirement assets. Unless the amounts involved are quite small and cashable, we must apply the awarded amount to the same product from which the funds have been awarded. Once the funds have been applied to new contracts in the non-participant spouse’s name, the funds may then be rolled over to an IRA (assuming cash withdrawals are permitted by the source institution(s)).
What are the tax consequences of cash withdrawals and/or settlements from the awarded contracts? All withdrawals or settlements by the alternate payee will be subject to ordinary income taxation. Withdrawals initiated prior to the alternate payee attaining age 59½ are not subject to the 10 percent early withdrawal penalty.
Can I reallocate how the awarded funds are invested? Allocation changes may be made only after the QDRO split is implemented and pursuant to the terms of the contracts and the plan. We then offer Automated Telephone Service and web-based services to facilitate such transfers amongst accounts.
When can I receive a distribution/rollover from the funds? Once we have applied the funds to the contracts issued in the name of the alternate payee, he/she will be treated as a terminated employee of the source institution(s), unless stated otherwise by the institution. As such, the settlement options available to the alternate payee will be determined by the rules established by the source institutions.
After we issue new contracts to the alternate payee, any income option(s) restricted by the contributing institution(s) will also be restricted for the non-participant spouse. However, if an income option is restricted until a specific age is attained, and unless specifically prohibited by a sponsoring institution, we will allow the non-participant spouse to use the original participant’s age to meet the age requirement.
The availability of lump sum withdrawals from deferred annuity contracts may be restricted by the terms of the contracts and the provisions of the sponsoring retirement plan. In addition, loans are not permitted under contracts issued to an alternate payee through a QDRO.
Do I have to complete an enrollment form to open my contracts? No. We will issue contracts in the name of the alternate payee for the awarded funds. We will use the alternate payee’s personal information listed in the QDRO to establish the account. Unless specified in the QDRO, the awarded amount will be prorated across all investment funds in the participant’s account.
Can I add funds to my new awarded contracts? Current tax law does not allow the commingling of self-remitter and employer-sponsored plan contributions. Therefore, self-remitter contributions may not be applied to a participant’s TIAA-CREF Retirement Annuity contract. However, an alternate payee may consider other investment products that are appropriate for his or her investment needs.
Payout Annuity Contracts principally fall into one of the following categories:
Life annuity contracts — a "stream of payments" type QDRO can be implemented. Alternate payees can be established for income during the life of the participant and for the death benefits, but the measuring lives remain the same.
Transfer Payout Annuity (TPA), Minimum Distribution Option (MDO), Interest Only (IO) payment contracts — for these types of contracts a separate interest TPA, IO, or MDO QDRO can be used if the parties wish to individually exercise the other payment options available under the rules of the plan. However, if the parties only wish to divide the stream of payments, the annuity income QDRO may be used. In both cases, a percentage is required to reflect the fact that the income will change over time.
MDO (Required Minimum Distribution Option)
Contracts may be split respectively. Since the payment amounts are set at the beginning of each year, the parties must divide the payments, for the calendar year of receipt of the QDRO, amongst themselves and arrange tax reporting accordingly.
Will the funds that are awarded to me be subject to minimum distribution requirements each year, even if I am not yet 70½? Once payments have commenced under the participant’s MDO contract they must continue, even if some of the accumulation is placed into a contract for an Individual who has not attained their required beginning date. However, the alternate payee can roll the remaining accumulation under the newly issued MDO contract into an IRA (if cash is awardable under the retirement plan), and further distributions can be postponed until the former spouse reaches the required beginning date.
As to annuity contracts already in Payout status, why do I need to complete the tax withholding election form W4-P? The IRS requires that TIAA-CREF obtain the signed Federal Tax Withholding Election form W-4P before completing the process. Generally, upon receipt of notice that the QDRO has been issued by the court, payments will be put on hold, and the process to divide them implemented. After implementation the benefits will be released for receipt by the first of the month unless otherwise specified.
What arrangements can be made for spousal or child support payments or arrearages? For cases involving ongoing income payments or arrearages, the appropriate percentage of income stream from payout annuity contracts can be paid to the adult alternate payee. A percentage is required to reflect the fact that the income will change over time. Specifics as to whose responsibility it is to advise TIAA when the obligation ceases or ends must be included, as well as the impact of the participant’s death and issues of beneficiary designation(s).
Generally deferred annuity contract accumulations are not used to satisfy immediate support needs either because the participant has not converted to income or because plan or contract restrictions may not permit income to begin until some further date. A separate interest QDRO can be implemented for significant arrears. The tax reporting for each party has to be specifically delineated.
1The Retirement Act, among other things, essentially requires spousal consent for any action that would reduce the amount available to a surviving spouse to less than 50 percent of the retirement annuity accumulation. This Act does not apply to all annuity contracts accumulations and inquiry should be made to determine whether updating the beneficiary designation while the divorce is pending is feasible.
Please note: TIAA-CREF will not be held responsible for errors and omissions on the part of the participant and legal counsel. Additionally, TIAA-CREF cannot be held responsible for any transaction the participant has executed, such as cash withdrawals, transfers and/or a conversion from a Deferred Annuity contract to an Immediate Annuity contract, prior to the receipt of a valid QDRO.