For QDROs, Federal law provides a very specific definition of “earliest retirement age,” which is the earliest date as of which a QDRO can order payment to an alternate payee (unless the plan permits payments at an earlier date). The “earliest retirement age” applicable to a QDRO depends on the terms of the retirement plan and the participant’s age. “Earliest retirement age” is the earlier of two dates:

• the date on which the participant is entitled to receive a distribution under the plan, or
• the later of either:
  • the date the participant reaches age 50, or
  • the earliest date on which the participant could begin receiving benefits under the plan if the participant separated from service with the employer.

Drafters of QDROs should consult the plan administrator and the plan documents for information on the plan’s “earliest retirement age.” The following examples illustrate the concept of “earliest retirement age.”

Example 1. The retirement plan is a defined contribution plan that permits a participant to make withdrawals only when he or she reaches age 59½ or terminates from service. The “earliest retirement age” for a QDRO under this plan: is the earlier of (1) when the participant actually terminates employment or reaches age 59½, or (2) the later of the date the participant reaches age 50 or the date the participant could receive the account balance if the participant terminated employment. Since the participant could terminate employment at any time and thereby be able to receive the account balance under the plan’s terms, the later of the two dates described above is “age 50.” The “earliest retirement age” formula for this plan can be simplified to read the earlier of: (1) actually reaching age 59½ or terminating employment or (2) age 50. Since age 50 is earlier than age 59½, the “earliest retirement age” for this plan will be the earlier of age 50 or the date the participant actually terminates from service.

Example 2. The retirement plan is a defined benefit plan that permits retirement benefits to be paid beginning when the participant reaches age 65 and terminates employment. It does not permit earlier payments. The “earliest retirement age” for this plan is: the earlier of (1) the date on which the participant actually reaches age 65 and terminates employment, or (2) the later of age 50 or the date on which the participant reaches age 65 (whether he or she terminates employment or not). Because age 65 is later than age 50, the second part of the formula can be simplified to read “age 65” so that the formula reads as follows: the “earliest retirement age” is the earlier of (1) the date on which the participant reaches age 65 and actually terminates or (2) the date the participant reaches age 65. Under this plan, therefore, the “earliest retirement age” will be the date on which the participant reaches age 65.

Reference: [ERISA § 206(d)(3)(E); IRC § 414(p)(4)]