Contributions made to retirement and pension plans during a marriage are community property.  During a divorce, couples divide retirement and pension plans just like any other marital asset.  The couple may split retirement plans any way they see fit, whether it be that one spouse completely buys the other one out of their share, or one spouse receives a percentage or fixed amount of the retirement payments.  If a spouse opts to receive any part from their spouse’s retirement plan(s), they will need to file a qualified domestic relations order (QDRO). It will be necessary to prepare a QDRO for each plan that the couple agrees to divide.

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Do You Need a QDRO?

Federal law does not allow the benefits of certain employer-sponsored retirement plans to be assigned, but does allow exceptions for QDROs.  Plans that require QDROs include 401(k)s, 403(b)s, 457s, thrift plans, profit-sharing plans, money purchase plans, employee stock purchase plans, and other corporate/business plans.  Divisions of IRAs are a transfer incident to divorce and do not need a QDRO.  Government sponsored pensions plans also do not require a QDRO. If one spouse accepts a lump sum buyout, then they will not need a QDRO.

On the other hand, parties that are divorcing may decide to waive claim to each other’s retirement. In this case, it would not be necessary to prepare a QDRO as a QDRO is only necessary to divide retirement, not waive a right to it.

How to Divide Retirement in Divorce

It is not uncommon for the parties to agree to divide retirement in divorce. The Judgment of dissolution must identify the terms of division. It is essential to understand that the divorce or legal separation Judgment, itself, does not formally divide retirement in divorce. To officially divide retirement in divorce, the parties must prepare a QDRO. The QDRO document will outline the term of the retirement division. Here are some essential tips to remember about the QDRO process:

  • The Plan Administrator of the retirement account will need to pre-approve the QDRO to make sure it conforms to the Plan’s rules.
  • Once the Plan Administrator pre-approves the proposed QDRO, the parties can sign the QDRO and file it with the court.
  • All QDROs are court orders and need the signature of the Judge.
  • After the Judge approves the QDRO order, you will need to send a copy of the filed Order to the Plan Administrator.
  • Once the Plan Administrator receives the filed QDRO order, they will split the account according to terms of the QDRO order
  • Each party will then have a separate account with their share of the retirement benefits.

If you need a QDRO after a divorce, you should hire someone with experience in preparing these documents. QDROs are usually custom pleadings, and not fill-in-the-blank court forms. Each Plan has its own requirements to divided the retirement plan benefits. As a result, QDROs for different types of Plans will vary. Fortunately, most Plans will provide written materials that outline their requirements. To make sure the QDRO accommodates the provisions of a specific plan, you should hire a legal document preparer or attorney that is familiar with QDRO preparation to help prepare the document.

The QDRO must identify the plan name, the name and most recent address of the alternate payee (divorcing spouse), the percentage or dollar amount due to the alternate payee, and the duration of the payments.  Some Plans have pay-out options regarding the delivery of benefits to the alternate payee based on a specific set of circumstances. The QDRO will need to address all payout options available to the alternate payee.

Once the QDRO is complete, you must send it to the retirement’s Plan Administrator.  The Plan Administrator reviews the order to make sure that the order complies with federal law and the procedures of the plan.  Once the Plan Administrator checks the QDRO, he/she will either accept it or reject it.  If the Plan Administrator denies the order, he/she will explain the reasons for the rejection so that you can make changes to the QDRO.  Once the Plan Administrator accepts the QDRO, you can file the Order with the court.  The Judge will review the QDRO and sign the order to enable the Plan Administrator to divide the account.

You can file a QDRO once the court accepts and approves the divorce settlement agreement.  Although you can file a QDRO at any time after the court enters the divorce judgment, it is in the best interest of the alternative payee to file it as soon as possible.  The alternate payee cannot receive payments until a QDRO is filed.  If the primary payee has already begun receiving retirement payments, the alternate payee cannot receive retroactive payments, even if they would have been entitled to those payments.

If you need help preparing a QDRO, contact A People’s Choice. Our experienced staff has prepared thousands of QDROs and can help you with the task of preparing a QDRO to divide retirement in your divorce. Call us today at 800-747-2780.

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