A Qualified Domestic Relations Order (QDRO) is a specific court order that addresses retirement benefits as part of marital property division for divorce. It can also be used for the enforcement of payment for overdue spousal maintenance or child support. This type of specialized order is important as federal law does not allow any retirement plan to pay out benefits to anyone other than the account holder, also known as the plan participant. With a QDRO, retirement plan benefits can be paid to a child, spouse, former spouse or another dependent.
A court will not prepare a QDRO. Their role is limited to reviewing and approving the order once it has already been prepared. As such, the party who needs the order or their attorney must submit a proposed order for the approval of the court. This involves a complex interaction between federal and state laws, the plan’s rules and the divorce order or settlement agreement. Due to the complex interactions, many attorneys do not prepare QDROs on their own. Instead, they outsource the preparation to another attorney who is experienced in retirement division.
Many retirement accounts can be divided in divorce cases. A person’s 401(a), 401(k), 403(b) and 457 plans are all considered, in addition to federal and state or local retirement plans, pensions and retirement pay from military service.
Why you need a QDRO
Once approved by the relevant retirement plan, those benefits from your former spouse’s plan can be paid out. This remains true even if both parties agree to divide the retirement plan on their own; the signed order is still required.
The QDRO transfers both the ownership and the tax liability to the person receiving the money. Additionally, despite obtaining a signed court order, not all retirement plans can be divided. Since retirement benefits may be relevant for your present and future financial security, it’s important that they are addressed in the settlement and that receipt of those benefits is clarified within the order.
The “Model” QDRO
Some plans have a model QDRO available. Some of these models are written to protect an employee while others are drafted in a way that makes the transfer easier on the plan. Relying on a model QDRO can be detrimental without experience and legal knowledge, as its implications are unknown prior to its execution. The time and money needed to correct a proper QDRO and its results can be significant.
About Individual Retirement Accounts (IRAs)
Under federal law, you do not need a QDRO for an IRA. However, sometimes a financial institution will refuse to transfer any IRA funds without a proper QDRO on file. Because Financial institutions follow strict policies, their legal department may be unwilling to proceed with the transfer. In this situation, the most efficient solution is to obtain a proper QDRO.
The QDRO and Support
Depending on the rules of your retirement plan, if your former spouse owes child support or maintenance, you may be able to use the QDRO for those payments. Check with the plan’s administrator to find out whether you can include this in your QDRO.
Our experienced staff has prepared thousands of QDROs over the years. Our attorneys handle many areas of retirement division, including 401(K) plans sponsored by employers, federal, local and statement retirement plans, and military retirement pay.
With Burnham Law by your side, you have the knowledge and skills needed to pursue the best possible outcome for your case. For any delay or improper preparation in your QDRO, your rights could be negatively impacted.
Orders are time-sensitive, so your proposed order will be sent within three business days of receipt of all documentation requested in connection with the QDRO, the signed fee agreement and full payment.
72 Hour Guarantee: In recognition that the preparation of a QDRO can be time-sensitive, your draft QDRO will be prepared and sent to you for your review within three (3) business days from our receipt of the signed fee agreement, payment in full, and all of the requested information and documentation. If not, the QDRO draft will be prepared to you free of charge.