A Qualified Domestic Relations Order (QDRO) is a court order that is necessary when a divorced couple splits a savings plan, 401K, government pension, a corporate pension plan, or any other qualified plan that may be offered through employment. A QDRO may be included in a divorce decree or signed by the Court after the divorce is final.
The divorce decree is often not sufficient to actually receive those assets, so a QDRO (pronounced “kwa-dro”) is necessary to initiate the transaction. Companies usually have their own sample document; there’s no standard one-size-fits-all Qualified Domestic Relations Order for every corporation, employer, pension plan or other savings plan. There are many different plans that require this document in order to divide the retirement assets to the alternate payee or the spouse that’s not working for that particular company or entity.
The alternate payee is responsible for preparing a domestic relations order (DRO) that the judge will sign. If the DRO meets plan rules it is qualified by the plan administrator and becomes a QDRO. The QDRO will instruct the plan administrator on how to pay the non-employee spouse’s share of the plan benefits. It allows the funds in a retirement account to be separated and withdrawn without any tax penalty.
Care must be taken when drafting a QDRO. There are specific requirements that must be met. It must specify the name and last known mailing address of the participant and each alternate payee, the name of each plan to which the order applies, the amount (or method for calculating the amount) to be paid to the alternate payee, and the number of payments or time period covered by the QDRO. The QDRO must not require a retirement plan to provide an alternate payee or participant with any type or form of benefit not otherwise provided under the plan, provide for increased benefits, pay benefits to an alternate payee that are required to be paid to another alternate payee under another order previously determined to be a QDRO, or pay benefits to an alternate payee in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her subsequent spouse.
If you want to protect your future retirement and savings, ensure that your attorney is qualified to prepare a QDRO and understands the difficult aspects of QDRO’s. The attorneys at the law office of PP&T are well-equipped to deal with all aspects of property division in divorce, including complex divisions of pensions or retirement accounts. To learn more about how to use a QDRO to divide retirement assets in your divorce contact a knowledgeable divorce lawyer at PP&T.