{"data":{"id":"us-ky/krs-161.700","jurisdiction":"us-ky","citation":"KRS 161.700","heading":"Funds exempt from taxation and process -- Assignment to trustee of","body":"special needs trust -- Taxability after December 31, 1997 -- Benefits not\nconsidered marital property -- Qualified domestic relations order.\n(1) Except as otherwise provid ed by this section and KRS 161.655(5), the right of a\nmember to a retirement allowance and to the return of contributions, any benefit or\nright accrued or accruing to any person under KRS 161.220 to 161.716, and the\nmoney in the various funds established p ursuant to KRS 161.220 to 161.716 are\nhereby exempt from any state or municipal tax, and shall not be subject to\nexecution, garnishment, attachment, or other process, and shall not be assigned.\n(2) Notwithstanding the provisions of subsection (1) of this s ection, retirement\nallowances and other benefits accrued or accruing under KRS 161.220 to 161.716\nto a person who is the beneficiary of a special needs trust may be assigned to the\ntrustee of that special needs trust. Any retirement allowances or other ben efits\nassigned to a special needs trust under this subsection, or accrued or accruing under\nKRS 161.220 to 161.716 to a person who is the beneficiary of a special needs trust,\nshall cease upon the death of the beneficiary of the special needs trust and sha ll not\nbe subject to state reimbursement for Medicaid benefits paid on behalf of the\nbeneficiary under a Medicaid payback provision.\n(3) Notwithstanding subsection (1) of this section, retirement benefits accrued or\naccruing to any person under this retire ment system on or after January 1, 1998,\nshall be subject to the tax imposed by KRS 141.020, to the extent provided in KRS\n141.010 and 141.0215.\n(4) Retirement allowance, disability allowance, accumulated account balance, or any\nother benefit under the ret irement system shall not be classified as marital property\npursuant to KRS 403.190(1), except to the extent permitted under KRS 403.190(4).\nRetirement allowance, disability allowance, accumulated contributions, or any other\nbenefit under the retirement sys tem shall not be considered as an economic\ncircumstance during the division of marital property in an action for dissolution of\nmarriage pursuant to KRS 403.190(1)(d), except to the extent permitted under KRS\n403.190(4).\n(5) Qualified domestic relations orders issued by a court or administrative agency shall\nbe honored by the retirement system if:\n(a) The benefits payable pursuant to the order meet the requirements of a\nqualified domestic relations order as provided by 26 U.S.C. sec. 414(p). The\nretirement system shall follow applicable provisions of 26 U.S.C. sec. 414(p)\nin administering qualified domestic relations orders;\n(b) The order meets the requirements established by the retirement system and by\nsubsections (5) to (13) of this section. The board of trustees of the retirement\nsystem shall establish the requirements, procedures, and forms necessary for\nthe administration of qualified domestic relations order by promulgation of\nadministrative regulations in accordance with KRS Chapter 13A; and\n(c) The order is on the form established by the retirement system pursuant to the\nretirement system's authority provided under paragraph (b) of this subsection.\n(6) A qualified domestic relations order shall not:\n(a) Require the retirement system to take any action  not authorized under state or\nfederal law;\n(b) Require the retir ement system to provide any benefit, allowance, or other\npayment not authorized under state or federal law;\n(c) Grant or be construed to grant the alternate payee any separate right, title, or\ninterest in or to any retirement benefit other than to receive payments from the\nparticipant's account in accordance with the administrative regulations\npromulgated by the system and as provided by subsections (5) to (13) of this\nsection; or\n(d) Grant any separate interest to any person other than the participant.\n(7) Any qualified domestic relations order submitted to the retirement system shall\nspecify the dollar amount or percentage amount of the participant's benefit to be\npaid to the alternate payee. In calculating the amount to be paid to the alternate\npayee, the court or administrative agency that is responsible for issuing the order\nshall follow the requirements set forth in the administrative regulations promulgated\nby the board of trustees. Notwithstanding any other statute to the contrary, the\nboard shall not  be required to honor a qualified domestic relations order that does\nnot follow the requirements set forth in the administrative regulations promulgated\nby the board of trustees.\n(8) If the qualified domestic relations order meets the requirements establis hed by the\nsystem and by subsections (5) to (13) of this section, payments to the alternate\npayee shall be distributed under the following conditions:\n(a) If the participant is retired and is receiving a monthly retirement allowance,\nthe month following th e date the retirement system receives a qualified\ndomestic relations order that complies with the administrative regulations\npromulgated by the retirement system and subsections (5) to (13) of this\nsection; or\n(b) If the participant is not retired, the mon th of the participant's effective\nretirement date in which the first retirement allowance is payable to the\nparticipant or the month in which the participant receives a refund of his or\nher accumulated account balance as provided by KRS 161.470(6).\n(9) An alternate payee's benefits and rights under a qualified domestic relations order\nshall terminate upon the earlier of:\n(a) The death of the participant;\n(b) The death of the alternate payee; or\n(c) The termination of benefits to the participant under any pr ovision of KRS\n161.220 to 161.716.\n(10) An alternate payee shall not receive a monthly payment under a qualified domestic\nrelations order if the participant is not receiving a monthly retirement allowance.\n(11) The cost of living adjustment provided to the  participant pursuant to KRS 161.620\nshall be divided between the participant and alternate payee in a qualified domestic\nrelations order as follows:\n(a) If the order specifies the alternate payee is to receive a percentage of the\nparticipant's benefit, th en the cost of living adjustment shall be divided\nbetween the participant and the alternate payee based upon the percentage of\nthe total benefit each is receiving upon the participant's retirement or upon the\ndate the order is approved by the retirement system, whichever is later; or\n(b) If the order specifies that the alternate payee is to receive a set dollar amount\nof the participant's benefit, then the order shall specify that:\n1. The cost of living adjustment shall be divided between the participant\nand the alternate payee based upon the percentage of the total benefit\neach is receiving upon the participant's retirement or upon the date the\norder is approved by the retirement system, whichever is later; or\n2. The alternate payee shall receive no cost of living adjustment.\nIf the order does not specify the division of the cost of living adjustment as\nrequired by this paragraph, then no cost of living adjustment shall be payable\nto the alternate payee. If no cost of living adjustment is provided to the\nalternate payee, then the participant shall receive the full cost of living\nadjustment he or she would have received if the order had not been applied to\nthe participant's account.\n(12) Except in cases involving child support payments, the retirement system may\ncharge reasonable and necessary fees and expenses to the recipient and the alternate\npayee of a qualified domestic relations order for the administration of the qualified\ndomestic relations order by retirement system. All fees and expenses shall be\nestablished by the administrative regulations promulgated by the board of trustees\nof the retirement system. The qualified domestic relations order shall specify\nwhether the fees and expenses provided by this subsection shall be paid:\n(a) Solely by the participant;\n(b) Solely by the alternate payee; or\n(c) Equally shared by the participant and alternate payee.\n(13) The retirement system shall honor a qualified domestic relations order issued prior\nto July 15, 2010, for prospective benefit payments if the order  or an amended\nversion of the order meets the requirements established by this section and the\nadministrative regulations promulgated by the retirement system. The order shall\nnot apply to benefit payments issued by the retirement system prior to the date the\norder was approved by the retirement system.","path":["KRS Chapter 161"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57217","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:51:11Z","sha256":"4fe10be3131720ca1858953621071b93c87cc4d3e27dd5b240769863cc15346f","source_id":"us-ky","stale":false,"prev":"us-ky/krs-161.695","next":"us-ky/krs-161.705"},"notice":"GroundRules: Original legal text. Not legal advice."}