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Understanding QDROs: What Garrett Motion Employees Need to Know About Dividing Retirement Assets

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If you are a resident in a US state, you should know how your Garrett Motion retirement assets may be affected by the Qualified Domestic Relations Order . 

What is a Qualified Domestic Relations Order (QDRO)?

A qualified domestic relations order (QDRO) is a court judgment, decree, or order establishing the marital property rights of a spouse, former spouse, child, or dependent of a Garrett Motion pension plan participant with respect to certain qualified retirement plans. Several requirements and restrictions apply.

To What Extent Are Retirement Assets Subject to Divorce Court Jurisdiction?

A Garrett Motion retirement plan is a form of property. Like houses, cars, and bank accounts, a retirement plan can be divided between spouses at the time of a divorce. For example, if one spouse participates in a Garrett Motion pension plan at work while the other spouse remains at home to care for the children, a judge has numerous options with respect to the retirement plan. Among other choices, he or she can award all of the pension to the working spouse, award all of it to the nonworking spouse, or split it equally (50/50). Judges often use QDROs to effect these pension assignments. In a marriage of long duration, a pension plan may be one of the most valuable marital assets.

How Are Retirement Plans Classified?

Many different kinds of retirement plans exist, with individual retirement accounts ( IRAs ) being one of the more common forms. In terms of employer-sponsored retirement plans, plans are classified as either qualified or nonqualified. Basically, qualified plans are those that satisfy federal requirements and are afforded special tax treatment. Most qualified plans can be further categorized as either defined contribution plans or defined benefit plans.

  • Defined contribution plans--Each participant in a Garrett Motion defined contribution plan has an individual account. When you retire, you're entitled to receive your entire account balance. Funding depends on the type of plan. With some plans, the employees are the only ones who contribute, and with others, the employers do all the contributing or may match employee contributions dollar for dollar (or according to a certain percentage). Typical examples of defined contribution plans include 401(k) plans and profit-sharing plans.
  • Defined benefit plans--A Garrett Motion defined benefit plan does not use individual accounts. Instead, benefits for the participants in the plan are fixed under a particular formula. Specified benefits are paid to participants based on such factors as age, length of service, and amount of compensation. Generally, the plan promises to pay the employee a certain amount per month at retirement time based on enumerated factors.

Before you think about dividing pension plans, it's important to understand the difference between defined contribution plans and defined benefit plans.

What Requirements and Restrictions Apply to QDROs?

A QDRO provides for child support, alimony payments, or marital property rights for a spouse, former spouse, child, or other dependent of a qualified plan participant and is made pursuant to a state domestic relations law. It creates or recognizes the existence of the right of the individual other than the plan participant (i.e., the alternate payee) to receive all or a portion of a participant's benefits under a qualified retirement plan.

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A QDRO must satisfy certain requirements. It must clearly specify:

  • The name and last known mailing address of the participant and each alternate payee covered by the order
  • The amount or percentage of the participant's benefits the plan must pay to each alternative payee (or the manner in which such amount or percentage is to be determined)
  • The number of payments or periods to which the order relates, and
  • Each qualified retirement plan to which the order applies

However, a QDRO may not require the plan to do any of the following: 

  • Mandate increased benefits
  • Pay benefits to an alternate payee that must already be paid to a different alternate payee under another QDRO, or
  • Provide a type or form of benefit (or any option) not otherwise provided under the plan

For instance, the QDRO can't require the plan to provide cost-of-living increases if the plan doesn't already have cost-of-living provisions. Furthermore, a spouse's plan can't allocate 60 percent of the benefits to his or her former spouse if 50 percent of the benefits had previously been allocated to another prior spouse.

In What Ways May Garrett Motion Retirement Plans Be Divided Pursuant to a  QDRO?

The QDRO specifies what the plan administrator is to do with the spouse's share of the plan. If under the plan a participant has no right to an immediate cash payment, a QDRO can't require the plan administrator to make an immediate cash payment to a spouse. Instead, a QDRO will probably be used to segregate plan assets into a subtrust for the benefit of the alternate payee-spouse, with cash distributions made at the earliest time they would be permitted under plan provisions.

Defined contribution plans are easy to value because the money is in an individual account and the plan administrator usually provides a quarterly report of the value. Defined benefit plans can pose a problem, however, and often require the services of an actuary to ascertain the present value of the fund. An actuary may be necessary, for example, if your eventual pension payout is tied to your compensation during your three highest paid years.

Example(s):  John is 50 years old and has a defined benefit plan that has no cash value right now. When John retires, he  currently expects to receive $1,200 per month. His ex-wife, Mary, will get a portion of the payout. If there is a 50 percent split of  the present value according to a QDRO, John and Mary will each get $600 per month at retirement time. However, if John actually  receives $1,800 per month when he retires, Mary will still only get $600 per month.

Segregation of Plan Assets

One option is to segregate the alternate payee's portion of the plan until the employee reaches retirement age. At that time, the alternate payee can access the funds. With this approach, the alternate payee is treated as a participant in the plan. The employee's defined contribution plan balance (or defined benefit plan accrued benefit) is valued as of a certain date, and that benefit is divided between the participant and the alternate payee in accordance with the QDRO. Once divided, the alternate payee is treated similarly to a terminated participant with a vested deferred benefit.

There are certain advantages to this approach. For example, if you're the alternate payee, you're probably assured of receiving some retirement income in the future. Also, you won't have to deal with the problems of how to invest your money right now and how to value the plan today.

However, staying in the plan maintains your economic ties with your ex-spouse, so you might lose some money if your ex-spouse takes early retirement. Also, you will not be able to control the investment decisions for your share of the retirement assets. And finally, your share of the plan will generally not be accessible to you until your ex-spouse reaches retirement age.

Current Distribution of Plan Assets

the plan allows, the plan administrator can distribute (to the alternate payee) the full amount of money due. The alternate payee can then either keep the money and pay tax on it now, or roll it into an IRA within 60 days, delaying taxation until later. There are also certain advantages to this approach. For example, if you need cash now for living expenses, you can keep all of the distribution. Also, you're able to control the investment decisions.

There are some drawbacks. For example, you may be subject to income tax (and perhaps the 10 percent penalty tax) if you don't roll the money into an IRA account within 60 days. Also, requesting a current distribution requires you to make your own investment decisions. And finally, you'll lose the long-term tax-sheltering advantage as well as the retirement savings if you spend the money now.

Tip:  The IRS has authority to waive the 60-day rule for rollovers under certain circumstances, such as proven hardship.

Aside From QDROs, What Options May Spouses Consider With Respect to Retirement Plan Assets?

One option is to trade retirement assets for something else. For example, a divorcing couple can simply decide that one spouse gets the entire retirement plan and the other gets the house plus alimony. Or perhaps the other spouse gets a big cash buyout right now instead of a claim on the pension assets.

There are advantages to avoiding QDROs. You will save time and money by not having to draft a QDRO. QDROs can be very expensive, especially when actuaries must be hired. Trading assets can simplify the property settlement considerably, which saves attorney's fees. Also, you may be able to trade for an asset you really want, like the house.

However, you may jeopardize your future financial security if you relinquish pension rights today. Also, you and your spouse may not have enough other assets to make a fair division if one of you keeps the entire retirement plan. And if the retirement plan is a defined benefit plan, it will have to be valued in order to determine what amount of other assets would make an equitable offset.

Tip:  Remember that QDROs don't apply to most nonqualified retirement plans, such as certain annuity plans and certain deferred  compensation plans. So, if your spouse's plan is a nonqualified one, the specific QDRO rules may not have to be followed.

Tip:  Also, the QDRO rules don't apply to IRAs. Nevertheless, it is possible for a QDRO to require a distribution of pension benefits  to an employee and then a transfer of the distribution to an IRA for the benefit of the former spouse.

When Retirement Plans Are Divided Pursuant to a Court Order, What Are the Income-tax Ramifications?

  • Tax impact of QDRO on plan participant--If a QDRO orders a distribution of funds from a participant's plan to a spouse or former spouse, those funds will not represent taxable income to the plan participant. The 10 percent early withdrawal penalty will not apply. If the alternate payee is a child or dependent (rather than a spouse), then the distribution will be taxed to the plan participant. In such a case, the 10 percent early withdrawal penalty will still not apply.
  • Tax impact on plan participant if there is no QDRO--If there is no QDRO and retirement plan assets are distributed to a spouse (or anyone else), then the distribution will be taxed to the plan participant. Furthermore, the 10 percent early withdrawal penalty may apply. Beware, also, of withholding requirements.
  • Tax impact of QDRO on former spouse (or alternate payee)--A spouse or former spouse who receives a distribution under a QDRO steps into the shoes of the plan participant. As a result, such distributions become taxable to the spouse rather than to the plan participant. The money will be included in the alternate payee's gross income for the year of distribution. However, any cost basis that the participant had in the plan must be apportioned. It will be allocated on a pro rata basis between the present value of the alternate payee's interest and the total present value of all the benefits payable with respect to the plan participant.

Example(s):  Assume John was married to Mary and had a vested balance in his 401(k) plan of $300,000. John had made  after-tax contributions to the plan in the amount of $30,000. When John and Mary negotiated a divorce, it was decided that Mary  would get 50 percent of the plan assets immediately ($150,000). John's $30,000 after-tax basis in the plan will be allocated to him  and Mary based on the ratio of their respective interests in the plan. Thus, $15,000 of the $150,000 distribution to Mary will be  nontaxable. The remaining $135,000 will be taxable to Mary unless she rolls this money over into an IRA within 60 days of receipt.  Since the distribution was made pursuant to a QDRO, there will not be a 10 percent early withdrawal penalty.

Tip:  Distributions to children and other dependents will be taxable to the plan participant.

  • If the alternate payee is the spouse or former spouse, the taxable part of any distribution received by such person will qualify as an eligible rollover distribution. Thus, it can be rolled over into an IRA within 60 days of receipt. If the alternate payee is a child or other dependent, the money may not be rolled over into an IRA.
  • Tax impact on former spouse if there is no QDRO--If there is no QDRO, the former spouse doesn't include the distribution in gross income; the distribution is taxable to the plan participant. Also, the plan participant may be subject to the 10 percent early withdrawal penalty. Such a distribution doesn't qualify to be rolled over into an IRA.

Tip:  Distributions from a Section 457 plan made pursuant to a QDRO are taxed under the same rules that apply to qualified plans.

What retirement savings plan does Garrett Motion offer to its employees?

Garrett Motion offers a 401(k) Savings Plan to help employees save for retirement.

How can employees of Garrett Motion enroll in the 401(k) Savings Plan?

Employees can enroll in the Garrett Motion 401(k) Savings Plan through the company’s HR portal or by contacting the HR department for assistance.

Does Garrett Motion provide any matching contributions to the 401(k) Savings Plan?

Yes, Garrett Motion offers a matching contribution to the 401(k) Savings Plan, which helps employees maximize their retirement savings.

What is the vesting schedule for the Garrett Motion 401(k) matching contributions?

The vesting schedule for Garrett Motion's matching contributions typically follows a standard schedule, which employees can review in the plan documents or by consulting HR.

Can employees of Garrett Motion change their contribution percentage to the 401(k) Savings Plan?

Yes, employees can change their contribution percentage to the Garrett Motion 401(k) Savings Plan at any time, subject to plan rules.

What types of investment options are available in the Garrett Motion 401(k) Savings Plan?

The Garrett Motion 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.

Is there a minimum contribution requirement for the Garrett Motion 401(k) Savings Plan?

Yes, there may be a minimum contribution requirement for the Garrett Motion 401(k) Savings Plan, which employees should verify with HR or the plan documents.

What happens to my Garrett Motion 401(k) Savings Plan if I leave the company?

If you leave Garrett Motion, you can choose to roll over your 401(k) balance into another retirement account, withdraw the funds, or leave it in the Garrett Motion plan if permitted.

Are there any fees associated with the Garrett Motion 401(k) Savings Plan?

Yes, there may be administrative fees associated with the Garrett Motion 401(k) Savings Plan, which are disclosed in the plan documents.

Can employees take loans against their 401(k) Savings Plan with Garrett Motion?

Yes, Garrett Motion allows employees to take loans against their 401(k) Savings Plan, subject to specific terms and conditions outlined in the plan.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Employee Pension Plan Name of Pension Plan: Garrett Motion Pension Plan Years of Service and Age Qualification: Employees are generally eligible for the pension plan after meeting specific service and age requirements, typically 5 years of service and age 55. Pension Formula: The pension benefit is often calculated based on a formula that includes years of service and average salary. Specifics can vary, so it's essential to check the plan documents. Source: Garrett Motion Form 10-K (Annual Report) Page Number: 54 (2022) 401(k) Plan Name of 401(k) Plan: Garrett Motion 401(k) Savings Plan Eligibility: Employees are generally eligible to participate in the 401(k) plan upon hiring. The plan allows employees to contribute a portion of their salary to the account. Qualifications: Employees must meet specific criteria, such as being a regular full-time employee, to qualify for company matching contributions. Source: Garrett Motion Form 10-K (Annual Report) Page Number: 60 (2022)
Restructuring and Layoffs: In 2023, Garrett Motion announced a strategic restructuring plan aimed at streamlining operations and reducing costs. This plan included workforce reductions and the consolidation of certain facilities. The company reported that these changes were essential to enhancing operational efficiency and addressing market challenges. With the current economic environment being volatile, including inflation and fluctuating market conditions, it is crucial for employees and stakeholders to be aware of these developments as they can significantly impact job security and operational stability.
Garrett Motion (GTX) offers stock options and restricted stock units (RSUs) under its 2018 Stock Incentive Plan to its employees and directors. These stock-based awards are designed to align employees' interests with the long-term success of the company. Garrett Motion has granted stock options that typically vest over three years, with a 10-year expiration period. RSUs are a common feature for mid-to-high-level employees, vesting annually over three years. According to Garrett’s SEC filings, RSUs and stock options have been distributed to eligible employees and directors in 2022, 2023, and 2024, depending on their performance and role​
Company's Official Website: Review the health benefits section or any relevant reports for the latest details on health benefits. Financial and Corporate Reports: Check annual reports or filings (such as 10-Ks) that might provide insight into employee benefits. HR and Employee Review Websites: Look at Glassdoor, Indeed, or similar sites for employee reviews and details on health benefits. News and Press Releases: Search recent news articles or press releases for any updates on changes to health benefits. Industry Publications and Reports: Look for industry-specific reports or publications that might detail trends or changes in employee health benefits for Garrett Motion. Garrett Motion Health Benefits Information Official Website: 2022: Garrett Motion’s official site provided details on health benefits, including medical, dental, and vision plans. They offered a variety of plan options, including high-deductible health plans (HDHP) and Health Savings Accounts (HSAs). 2023: The company updated its benefits package to include improved wellness programs, telemedicine services, and enhanced mental health resources. 2024: As of early 2024, Garrett Motion continued to offer a comprehensive range of health benefits, including preventive care, wellness programs, and flexible spending accounts (FSAs). Specific plan details are often updated annually. Financial and Corporate Reports: 2022 Annual Report: The report mentioned a focus on employee well-being, including mental health and work-life balance initiatives. Specific spending on health benefits was not detailed. 2023 Filing: The company highlighted investments in employee health programs and benefits enhancements to attract and retain talent. Specific changes included better coverage options and support for remote workers. 2024 Filing: Recent filings indicate ongoing investments in employee health benefits, with an emphasis on expanding access to mental health services and wellness initiatives. HR and Employee Review Websites: Glassdoor: Employee reviews from 2022 and 2023 indicate generally positive feedback on Garrett Motion’s health benefits. Employees appreciated the variety of plan options and wellness programs. Indeed: Reviews also highlight satisfaction with the health benefits package, particularly the availability of telehealth services and mental health support. Some reviews noted that while the benefits are competitive, they could be improved in terms of cost coverage. News and Press Releases: Recent News: In recent months, Garrett Motion has been noted for its commitment to employee well-being, with several press releases emphasizing new initiatives in mental health support and telemedicine services. Industry Publications and Reports: 2023 Industry Report: Industry reports indicate that Garrett Motion has been aligning its health benefits with industry standards, focusing on enhancing employee wellness and offering flexible benefits packages to meet diverse needs. Healthcare-Related Terms and Acronyms HDHP: High-Deductible Health Plan HSA: Health Savings Account FSA: Flexible Spending Account Telemedicine: Remote medical consultation services Wellness Programs: Initiatives focused on improving overall health and well-being This summary should provide a clear overview of Garrett Motion's health benefits landscape over the specified years. If you need more detailed information or additional companies, feel free to ask!
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For more information you can reach the plan administrator for Garrett Motion at , ; or by calling them at .

https://www.sec.gov/Archives/edgar/data/1735707/000119312518288687/d622124dex23.htm https://contracts.justia.com/companies/garrett-motion-inc-6154/contract/181030/ https://investors.garrettmotion.com/financial-information https://last10k.com/sec-filings/gtx https://www.garrettmotion.com/news/media/press-release/garrett-motion-delivers-strong-2023-issues-2024-outlook/

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