What Is A QDRO And When Is It Necessary?

When spouses are divorcing, they usually go through a process of dividing property and debt acquired during the marriage. Retirement accounts are often one of the larger assets divided between spouses. Depending on the type of retirement accounts each spouse may own, a Qualified Domestic Relations Order (QDRO) may be necessary to divvy up the retirement money.

What Is A QDRO?

A QDRO is a legal document that directs the administrator of a pension plan to give a certain amount of an employee’s pension to his/her non-employee ex-spouse after the divorce is final. Below is some basic information about QDROs and the process for obtaining one.

Why is a QDRO Necessary?

As a general rule, you are not permitted to remove money from your retirement accounts on a tax-free basis. A QDRO is a legal order that allows benefits to be transferred tax free from one spouse’s retirement account to an account designated by the other spouse. This process is not automatic and requires court approval.

What Types Of Accounts Need a QDRO?

A QDRO is required for division of all retirement accounts covered under the Employee Retirement Income Security Act (ERISA). Such accounts include: • Private pension plans; • 401(k) plans; • 403(b) plans; • 457 plans; • Employee stock ownership plans (ESOPs); • Defined benefit plans.

What Information Must be Contained In A QDRO?

QDROs must contain the following information: • The name and last known mailing address of the participant and each alternate payee; • The dollar amount or percentage (or the method of determining the amount or percentage) of the benefit to be paid to the alternate payee; • The number of payments or time period to which the order applies; and • The name of each plan to which the order applies. In addition, a QDRO cannot: • Require a plan to provide an alternate payee or participant with any type or form of benefit not otherwise provided under the plan; • Require a plan to provide for increased benefits; or • Require a plan to 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.

What Is The QDRO Approval Process?

Once a judge has signed the QDRO and it has been entered as a formal court order, the Plan Administrator remains the ultimate decider as to whether the requirements have been satisfied to initiate the transfer of money. If the order complies with the requirements of ERISA and the plan summary, it should be approved by the plan administrator and the benefits should be distributed in accordance with the QDRO.

Lynx Legal Service can prepare your QDRO for a fraction of the amount an attorney would charge. Please call our office today at 888-441-2355 if you need a QDRO drafted, or if you have any questions regarding the process.