Dividing SAS Employee Retirement Benefits
SAS, one of world’s largest private software companies, is headquartered in Cary North Carolina. SAS has an entire campus positioned right off of 1-40 where more than 5,000 people work. Benefits at SAS are touted as some of the best available – on-site daycare, on-site health care, a 58,000 square foot recreation and fitness center, and even life counseling services for those going through divorce. In addition to these benefits, SAS also offers very generous employee retirement benefits.
If you are a SAS employee or a non-employee spouse going through a divorce, you’ll want to know the details of how to divide the employee retirement benefits. This article is intended to help both spouses work through the difficult task of splitting SAS retirement benefits.
What retirement benefits do SAS employees have access to?
SAS offers a profit sharing and 401(k) retirement plan as a benefit for employees to save for retirement on a tax-advantaged basis. Eligible employees can contribute anywhere from 1% to 80% of pay, and may chose to structure this as a pre-tax elective deferral or an after-tax Roth elective deferral.
SAS contributes to the plan in several ways. First, the company may opt to make a safe harbor contribution to the Plan, which is determined at the beginning of each calendar year. SAS also allows the participant to participate in profit-sharing by making an annual discretionary profit sharing contribution.
Employee elective deferrals, rollover contributions, and company safe harbor contributions are always considered 100% vested, and thus cannot be forfeited. Profit sharing contributions are subject to vesting rules, however. The vesting schedule of profit sharing contributions is as follows:
|Years of Service||Vested Percentage|
|Less than 2||0%|
|Between 2 and 3||25%|
|Between 3 and 4||50%|
|Between 4 and 5||$75|
|At least 5||100%|
Through Fidelity, SAS allows participants in the retirement plan to make certain changes, for instance alter the investments investment allocation of contributions, change the deferral amount, request a qualifying hardship withdrawal, and even borrow against the plan.
How do you divide the SAS 401(k) Retirement Plan?
In order to divide the SAS 401(k) Retirement Plan incident to divorce, a Qualified Domestic Relations Order (QDRO) must be obtained. A QDRO is necessary to divide all qualified employer plans that are subject to ERISA, the 401(k) Plus Plan is exactly that.
What is a QDRO?
A QDRO is a legal instrument that allows the plan owner to transfer rights to an alternate payee for the purposes of child support, spousal support, alimony, or property rights. With regard to property division incident to divorce, the QDRO allows for a person to assign rights in a retirement account to another person, without having to make a withdrawal and suffer a tax penalty.
Who drafts the QDRO?
Because of the complexity of these orders and the specific rules that must be followed, it is suggested that an attorney be the person responsible for drafting the QDRO. It is customary for the spouse who is receiving the funds to be the spouse responsible to pay the legal fees necessary to obtain the QDRO, and it will be that spouse’s attorney who actually creates and files the QDRO. While it is related to equitable distribution, obtaining a QDRO is essentially a separate legal process, and therefore it will take some time to draft and file the order and it can increase your legal fees.
Fidelity is the plan administrator of SAS retirement plans, and they offer a unique service that is helpful in obtaining a QDRO. By visiting their online QDRO center, a person can view the QDRO Guidelines and Procedures specific to SAS employee plans and get assistance with creating a QDRO. If the non-employee spouse decides to draft the QDRO using the Fidelity QDRO center, it is still advised that an attorney review the QDRO prior to submitting the order to the court.
Is there an alternative to the QDRO?
Because obtaining a QDRO can increase legal fees, often the non-employee spouse who is entitled to receive funds from the SAS employee’s retirement account may be inclined to accept another asset of comparable value in lieu of obtaining the QDRO to divide the 401(k). For example, if a spouse is entitled to $50,000 from her SAS employee-husband’s retirement plan, she might prefer to take a lump sum in that amount from another investment account. Or even receive an asset, like a piece of land or a vehicle of comparable worth, rather than going through the process of obtaining a QDRO.
SAS employees also have the ability to take a general loan from the balance of their retirement account. If you are the SAS employee and would rather take a short-term loan to provide your spouse with the lump sum amount he or she is entitled to (rather than having to liquidate other assets or divide your retirement account through a QDRO), you may be eligible to o so.
General loans from the 401(k) must be paid back within five years, and cannot exceed the lesser of $50,000 or 50% of the vested account balance. Before deciding to take a loan from the retirement plan the SAS employee-should be sure he or she is aware of any and all tax consequences associated with taking the loan.
What goes in the QDRO?
To get a better understanding of what a QDRO looks like, and what actually is included in the document, please look at the sample we have provided.
At a minimum, as mandated by ERISA, the QDRO will require:
- The name of the plan
- The name and last known mailing address of the participant
- The name and mailing address of the participant
- The name and mailing address of the alternate payee (spouse of employee)
- The amount to be paid
- The manner in which the payment is to be determined
- The number of payments or period to which the order applies
Where do I send the QDRO?
Once the QDRO has been drafted, either manually or through the Fidelity QDRO center, it will be submitted to the court for a judge’s signature. The person who submits the QDRO will receive a “court certified” or “true” copy of the order. The true copy will then be sent to the plan administrator at the following address:
SAS Institute Inc.
Plan Administrator Committee for the SAS Retirement Plan
c/o Benefits Department
SAS Campus Drive
Cary, NC 27513
Additional questions about the retirement plan or the QDRO can either be directed to Fidelity, using their online QDRO center, or to the SAS Benefits Department at (919) 677 – 8000.
What happens next?
Once the Plan Administrator has the certified or true copy of the order it will be reviewed to ensure compliance with the plan requirements. If something is missing, a notification will be sent to all relevant parties and corrective measures will need to be taken.
Unlike other court orders, a party cannot simply modify the existing QDRO by making an appropriate motion. Rather, the party must draft a new QDRO, including a provision clearly stating that the new order amends or supersedes the previous QDRO. The new one will have to be submitted to the court, signed by the judge, and sent to the Plan Administrator, just as the original one was.