What is a QDRO?
Retirement accounts are individual in nature, and there is only one name listed on them. This is why during a divorce, many spouses mistakenly believe their IRAs, 401Ks, and other types of retirement accounts are not part of the marital estate. In actuality, they are considered marital property, and they are included in the division of property. Since accounts like these have heavy restrictions on how they are set up and used, a special financial vehicle is needed to divide retirement assets in-keeping with the law. This vehicle is known as a QDRO.
What is a QDRO?
A QDRO (Qualified Domestic Relations Order) is a special court order granting a person the rights to a portion of the retirement benefits of their former spouse which were earned through participation in an employer-sponsored retirement plan. A QDRO is generally prepared during a divorce proceeding but can also be filed after the divorce.
Within a QDRO, the “participant” is the person who earned the retirement benefit, and the “alternate payee” is the person designated to receive a portion of those benefits. A QDRO can provide benefits to the alternate payee while the participant is still alive and can award survivor benefits after the participant dies.
A domestic relations order is not necessarily the same thing as a QDRO. Any family law court can issue domestic relations orders, but these only become “qualified” once they are accepted by the retirement plan. QDROs refer to plans issued by private companies and non-profits. If the employer was a government entity, a different type of order might be required.
Why Do I Need a QDRO?
According to Federal law, retirement benefits can only be divided between former spouses if a QDRO has been issued. This means that the language in your divorce decree, even if it clearly states that retirement benefits will be split, may not be enough. While this can sometimes be used as a QDRO, a qualified plan is under no obligation to accept this document before disbursing funds to a former spouse.
Technically, you can get a QDRO after a divorce is finalized, but it is better to obtain this document and file it as soon as possible when getting a divorce. If your spouse, who is the plan participant, decides to retire after the divorce is final and there is no QDRO in place, the plan will begin paying out the full benefit only to them. If a QDRO is later filed, it will only apply to future payments.
A former spouse, who is the plan participant, could also pass away before a QDRO is put in place. If this happens, the retirement plan will still need to honor a QDRO, but it does not need to allow any changes to payment types or amounts that are not permitted by the plan. Finally, a former spouse (the plan participant) could remarry and divorce again. If the second spouse files a QDRO and you have not, this could also impact your benefits.
How Do I Obtain a QDRO?
QDROs are complex legal filings that generally require the assistance of a qualified professional. There are close to 700,000 private retirement plans in the U.S., and each has its own requirements and rules for filing a QDRO.
In general, every QDRO must include four key elements:
- The name, current address, and social security number of the plan participant and the alternate payee;
- The exact name of the plan to which the QDRO applies;
- The percentage or dollar amount of the payments to be made to the alternate payee;
- The time period for the order or number of payments included.
Speak with an Experienced Pensacola Family Law Attorney
Divorce can be an emotional and complex process. When it comes to asset division, your rights and future financial well-being should take top priority. Unfortunately, drafting and filing a QDRO often requires technical knowledge, and this is not something you want to leave to chance.
Crystal Collins Spencer specializes in handling complex family law cases that involve complicated financial issues. If you are going through a divorce or any other family law matter, Spencer Law can help. Contact our office now at 820-912-8080 to schedule your initial consultation. You may also send us a secure and confidential message through our online contact form.