Galen J. Smith - Page 5

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          QDRO, are not taxable to the plan participant, but are instead,             
          taxable to the former spouse/alternate payee as if he or she were           
          the plan participant.4  Conversely, a domestic relations order              
          that fails to satisfy the requirements of section 414(p) is not a           
          QDRO, and, consequently, the exception provided in section                  
          402(a)(9) is inapplicable to such orders.  In such a situation,             
          any distribution made from the plan will be taxable to the plan             
          participant under section 402(a)(1).                                        
               In the instant case, respondent finds herself in a                     
          precarious position, between two former spouses of whom one is a            
          party to this litigation, the other is not.  The question in                
          dispute is which of the former spouses ultimately will be liable            
          for the tax attributable to the subject distributions.  The                 
          eventual resolution of the QDRO issue will determine whether                


               4 Sec. 401(a)(13)(A) was added by the Employee Retirement              
          Income Security Act of 1974 (ERISA), Pub. L. 93-406, sec.                   
          1021(c), 88 Stat. 829, 935, to require tax-qualified plans to               
          provide "that benefits provided under the plan may not be                   
          assigned or alienated".  ERISA, sec. 514(a), 29 U.S.C. sec.                 
          1144(a) (1988), provides that the labor title of ERISA preempts             
          State law.  Consequently, after the enactment of ERISA, it was              
          unclear whether this preemption provision applied to prohibit the           
          attachment or assignment of pension plan benefits under State               
          community property and family support laws.  Congress enacted the           
          Retirement Equity Act of 1984 (REA), Pub. L. 98-397, 98 Stat.               
          1426, to clarify the application of ERISA antialienation                    
          provisions to State family support laws and community property              
          laws.  See S. Rept. 98-575, at 19 (1984), 1984-2 C.B. 447, 456.             
          REA provided new rules for the treatment of certain domestic                
          relations orders, requiring the distribution of all or part of a            
          participant's benefits under a qualified plan to an alternate               
          payee.  Sec. 204(b) of REA, 98 Stat. 1445, added sec. 414(p),               
          which defines a QDRO.  Sec. 401(a)(13)(B) provides that the                 
          creation, recognition, or assignment of an alternate payee's                
          right to plan benefits under a QDRO does not violate the                    
          antialienation provisions of ERISA and sec. 401(a)(13)(A).                  


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