(a) If, upon receipt of a domestic relations order, the domestic relations liaison is of the opinion that the order does not comply in all ways with the requirements for a qualified domestic relations order under the provisions of this chapter, the domestic relations liaison shall notify the parties that the order does not qualify as a qualified domestic relations order in the notice sent under §129.3 of this title (relating to Notice Regarding Receipt of Order, such notice being hereinafter referred to as "§129.3 Notice"). Unless the participant or the alternate payee pursues action in a court of competent jurisdiction within 90 days of the date of the §129.3 Notice to bring the order into compliance with the requirements of this chapter relating to qualified domestic relations orders, the system will proceed as if it never had received the non-compliant order. The system may require a certified copy of the filed pleading to pursue action on the order.
  (1) BEFORE RETIREMENT. If the order relates to a participant who has not yet begun to receive service retirement or disability retirement benefit payments subject to the order when the system receives the order, the system may delay action on an application by the participant for benefits that would be subject to the order (if the order were to be qualified under this chapter), and the domestic relations liaison may proceed in accordance with the remaining subsections of this section. If the domestic relations liaison has made an initial determination under this section that the order does not appear to qualify, the system nonetheless may (but shall not be required to) pay to the participant all or any portion of any benefits to which the participant appears entitled under the order while interpreting the division of benefits in the light most beneficial to the alternate payee under the domestic relations order and state law. In determining under this paragraph whether or not to process a benefits application and begin payments to a participant pending pursuit of a qualified domestic relations order, the system may take into consideration the difficulty in dividing the benefits between the parties prior to receipt of, or in re-dividing the benefits after receipt of, a qualified domestic relations order. Any benefits not paid under this paragraph shall be retained by the system until they are paid under one of the remaining subsections of this section.
  (2) AFTER RETIREMENT. If the domestic relations order relates to a participant who is receiving service retirement or disability retirement benefit payments subject to the order when the system receives the order, the domestic relations liaison may proceed in accordance with this paragraph and the remaining subsections of this section.
    (A) If the order proposes to award the alternate payee a percentage of the then-current monthly benefit payable to participant (commonly referred to as a "carve-out"), the system shall reduce the amount to be paid to the participant to the portion of benefits to which the participant appears entitled under the order while interpreting the division of benefits in the light most beneficial to the alternate payee under the domestic relations order and state law. Any benefits not paid to the participant under this subparagraph shall be retained by the system until they are paid under one of the remaining subsections of this section.
    (B) If the domestic relations order proposes to award the alternate payee an interest in the participant's benefits from the system other than a carve-out (as described in subparagraph (A) of this paragraph), the system is not required to reduce the amount to be paid to the participant and retain the amount withheld for the alternate payee until the system receives an order that complies with the requirements of this chapter for qualified domestic relations orders because of the difficulty in dividing the benefits between the parties prior to receipt of, or in re-dividing the benefits after receipt of, a qualified domestic relations order. If a domestic relations order that falls under this subparagraph is subsequently brought into compliance with the requirements of this chapter for qualified domestic relations orders, payments to the alternate payee under the qualified domestic relations order shall be made prospectively only.
(b) If 60 days have elapsed since the date of the §129.3 Notice, and neither party has submitted documentation to the system reflecting that action has been pursued to bring the order into compliance, the domestic relations liaison will send another notice letter to each party by first class mail that reminds the parties that unless documentation has been submitted to the system showing that action has been pursued before the expiration of the 90-day period, the order will be determined not to be a qualified domestic relations order and the system will pay to the participant any sums that have been withheld up to that date, and shall thereafter make payment of benefits as if no order had been received by the system.
(c) If neither party has timely pursued before the expiration of the 90-day period described in subsection (a) of this section, or any applicable extension for good cause granted under this subsection, in accordance with this section or in accordance with §129.11 of this title (relating to Procedure for Obtaining Formal Hearing), the order is not a qualified domestic relations order and the system will pay to the participant any benefits that have been withheld hereunder after 90 days from the date of the §129.3 Notice unless the system has granted an extension for good cause prior to the expiration of the 90 days. Either party may request extensions for good cause, while pursuing court action to bring an order into compliance with the requirements of this chapter for a qualified domestic relations order, for up to 18 months from the date the domestic relations order was received. Any initial request for any extension for good cause must be received by the system prior to the expiration of 90 days after the date of the §129.3 Notice, and determination of good cause for extensions and the length of any extension shall be made by the system in its sole discretion. Any request for an additional extension must be received by the system prior to the expiration of the then applicable extension period. "Good Cause" may include, but shall not be limited to, notice of a hearing before the court with jurisdiction over the domestic relations order.
(d) Upon the expiration of 18 months from the date the domestic relations order was received, if the domestic relations order has not been qualified, the system will pay to the participant all benefits that have been withheld hereunder up to that date and shall thereafter make payment of benefits as if no order had been received by the system.
(e) In the event that, in the determination of the domestic relations liaison, the domestic relations order is subsequently brought into compliance with the requirements of this chapter for qualified domestic relations orders, the domestic relations liaison shall so notify the parties in writing, and the system will thereafter pay the sums payable under the order (including any benefits previously retained by the system) in the manner set forth in the order, unless such order is subsequently set aside or modified by a court of competent jurisdiction and such modified order is determined by the system to be qualified in accordance with the requirements of this chapter.
(f) Neither the system nor any officials or employees of the system shall be liable for making any payment under this section.

Source Note: The provisions of this §129.9 adopted to be effective July 1, 2022, 47 TexReg 3272