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A People’s Choice can save you hundreds of dollars by preparing your
Qualified Domestic relations Order QDRO instead of an expensive divorce attorney!
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A QDRO (Qualified Domestic Relations Order) is a special type of court order that
allows the division of retirement plan benefits between parties in a dissolution or legal separation. A QDRO (pronounced “quad row”) is a specific type of order that
recognizes the right of an “alternate payee” (i.e., legally separated spouse, former spouse, domestic partner, child and/or other dependent) to receive all or part of a
pension plan, which belongs to their spouse or former spouse. It is usually required when dividing one of the parties’ retirement plan benefits such as a pension or 401(k)
plan in a divorce proceeding.
If one of the parties has accumulated retirement benefits during the marriage, both
parties have certain rights to those benefits under the law. The person who earned the retirement benefit through his or
her employment is called the “participant.” The other person is referred to as the “alternate payee.” Federal laws governing
retirement plans prohibit a plan from paying benefits to anyone other than the participant, unless directed to do so under a
QDRO. Accordingly, a QDRO allows the plan to pay benefits to the alternate payee.
A QDRO must meet certain rules under federal law in order for it to be valid and must be issued by a “state authority”
(usually a court) through a judgment, order or decree, which addresses a property settlement. Governmental or public
retirement plans (e.g., military pensions, federal, state, county or city retirement plans) are not subject to the QDRO rules.
These plans typically require a court order for dividing retirement benefits, which resemble QDROs.
The division of the plan can be calculated several ways. Unless the Marital Settlement Agreement (MSA) or judgment
provides a specific dollar or percentage amount payable to the alternate payee, a formula is usually used based upon
several variables that instructs the plan administrator how to compute the amount payable to the alternate payee. It is a
common misconception that the QDRO will include the amount payable to the alternate payee.
If the plan allows for a lump sum distribution, the alternate payee can elect to receive his or her share in one single payment
or to roll over his/her share to an Individual Retirement Account (IRA) or other eligible plan. This is typical of 401(k) or profit
sharing plans. Defined benefit plans, however, generally only pay benefits in monthly installments or “annuities.” If the plan
will only pay benefits in the form of an “annuity” the alternate payee will typically receive monthly payments for life.
In the majority of cases, the process of obtaining a valid QDRO takes two to four months from the time that the drafting of
the order begins. The length of the process will vary from case to case and depends on several factors, many of which
are beyond the control of the preparer. These include variables such as the amount of time it takes for the court to issue
the QDRO or the time it takes for the plan administrator to formally approve the QDRO.
A QDRO isn’t always included in the divorce process, and many couples find that after paying high fees to their attorney,
that the QDRO is not included or the firm does not prepare them.
A People’s Choice can save you hundreds of dollars by preparing your QDRO instead of an expensive divorce attorney