Divorce FAQs
Qualified Domestic Relations Order (QDRO)Qualified Domestic Relations Order (QDRO)What is a QDRO?A Qualified Domestic Relations Order (QDRO) is a domestic relations order, which allows payouts from a retirement plan to a former spouse. The QDRO is necessary when dividing a retirement account pursuant to divorce proceedings due to the restrictions placed on pensions by Internal Revenue Code and Employee Retirement Income Security Act (ERISA). A QDRO is necessary to assure that a former spouse may receive benefits as an alternate payee, because without it the benefits may only be paid out to the individual employee who earned the benefits. What is a domestic relations order?A domestic relations order is any court order, judgment, or decree relating to alimony (spousal support), child support, or marital property rights of a child (or other dependent), former spouse, or spouse which is made pursuant to a state's domestic relations law. Who is the Participant?The participant is the employee who earned the benefits. Who is the Alternate Payee?The alternate payee is the person who will receive part of the pension. This person can be a spouse, ex-spouse, child, or other dependent of the participant. Do I need to have a QDRO drafted now?QDROs may be drafted at any point during the divorce process. However, if the participant dies before the QDRO is drafted and approved by the court. Often, it takes several weeks to compile the information necessary to complete the QDRO. Therefore, it is prudent to start drafting a QDRO early in the divorce process. How do I know if I need a QDRO?If a pension plan, including defined benefit plans and defined contribution plans, is, or is going to be, a part of your divorce settlement, you need a QDRO. Defined benefit plans (monthly payments or other specific benefits paid at retirement age) and defined contribution plans (individual accounts, including 401(k) plans) need a QDRO in place to allow distributions to a party other than the employee who earned the benefit. What needs to be in a QDRO?The basic requirements of a domestic relations order to qualify as a QDRO under ERISA are names and address(es) of the participant and alternate payee(s), the name of each plan covered by the order, dollar amount or percentage of the benefit to paid to the alternate payee(s), and the time period or number of payments contemplated by the order. All of these terms must be in writing. Will the court automatically enter an order for a QDRO in divorce proceedings involving retirement accounts?No. The QDRO provision is an exception to the general anti-alienation rule in ERISA. The QDRO must be drafted and presented to the court for inclusion in any order relating to marital property division, child support, or spousal support. In addition to submitting the QDRO to the court, it is advisable to submit proposed the QDRO to the plan administrator or sponsor. By submitting a draft to the plan administrator prior to submission to the court, potential deficiencies and problems can be avoided. Who is the plan administrator or plan sponsor?The plan administrator is specifically designated by the terms of the plan. A plan may designate a plan administrator in several ways, including by name, by reference to the person in a named position, by reference to a procedure by which an administrator is designated, or by reference to the person with the specific responsibilities of a plan administrator. The specific title "plan administrator" does not need to be used to effectuate designation. A plan sponsor becomes the plan administrator when no administrator is named. If the employer is a corporation, the corporation is the plan administrator. However, the corporation's board of directors may authorize an individual to act as the plan administrator. If the corporation's board of directors does not designate a plan administrator, any officer authorized to act on behalf of the corporation in regard to contracts of an equivalent value of the plan assets will be presumed to have authority to act as the plan administrator. Can my lawyer advise me regarding a QDRO?Yes. An experienced divorce lawyer will be able to explain the need for a QDRO and the steps necessary to ensure that a QDRO is in place and your interests are protected. Copyright © 1994-2006 FindLaw, a Thomson business DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter. |
