The Qualified Domestic Relations Order process can be somewhat complex and confusing to most divorcing couples. At A People’s Choice, we can help you obtain a QDRO for the division of a retirement/pension plan based on the terms of your divorce decree. We are often asked to explain to clients the QDRO process from start to finish. Read on to learn more about the steps in the QDRO process and how we can help you.
What is a Qualified Domestic Relations Order?
A Qualified Domestic Relations Order (QDRO) is a judicial order entered as part of a property division in a divorce or legal separation. The QDRO is the legal process that divides a retirement/pension plan. The QDRO formally recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan.
Private pensions and benefit plans such as 401(k), 403(b), and 457 may be divided by a QDRO. In addition, federal and state civil service plans and IRAs may also be divided by a QDRO.
The following steps in the QDRO process outline the QDRO process from start to finish and will help you understand what needs to be done to effectively divide the community property interest in a retirement plan after a divorce.
Steps of the QDRO Process From Start to Finish
Step 1- Gather Information
To begin the QDRO process, you will need to gather information such as the Plan name and Plan Administrator pertaining to the specific benefits that need to be divided. Your divorce decree must be completed to determine the amount of the retirement or pension Plan to be divided. If a Judgment has not been entered in your divorce proceedings, you will need to wait until a Judgment has been entered.
To prepare the QDRO, you will need to get information about your former spouse and your marriage. This information includes your spouse’s name, current address, social security number, date of marriage, date of separation and date of final Judgment of divorce. You will also need to know the exact name of the retirement plan and the name and address of the Plan Administrator. This information can usually be obtained from the employer of the participant spouse. Obtain the Summary Plan Description and QDRO Procedures from the Plan Administrator. The Plan Administrator will usually have a package of information available that outlines their QDRO policies and procedures. Our glossary of QDRO terms will help you understand some of the unique words that you will need to understand as you go through this process. If the Plan Administrator provides you with their plan package, it is important that you provide this package to the legal professional who is assisting you in drafting the QDRO.
Step 2 – Draft the QDRO
Once you obtain the information above, draft your QDRO. The QDRO is drafted as a stipulated order assuming both parties have agreed to the manner in which the retirement/pension will be divided. It should be drafted in compliance with the QDRO procedures received from the Plan Administrator. A legal professional such as A People’s Choice will be able to help in the drafting of the QDRO to meet the Plan’s criteria. Contact us for more information.
Step 3 – Obtain Spousal Approval
Once you have drafted the QDRO, ask for your former spouse’s approval of the drafted document. So long as the QDRO reflects the underlying provisions of the divorce decree, the former spouse, or their attorney, should provide his/her approval. This step is optional and may be avoided in the event the other party acts irrational. The QDRO does not need to be signed at this point.
Step 4- Obtain Plan Administrator Approval
Next, a copy of the QDRO is sent to the Plan Administrator for approval. The Plan Administrator may request changes to be made, which is quite common. Military and federal civil service pensions are not pre-approved by the Plan Administrator. Having your QDRO pre-approved can reassure that it will be approved once the judge authorizes the order.
Step 5 – Have All Parties Sign the QDRO
After the Plan Administrator has pre-approved the QDRO, the document can be signed by both parties. Some Plans require the Plan Administrator to also sign the final QDRO. Check with the Plan Administrator to determine the requirements of the Plan.
Sometimes a situation may arise where a spouse refuses to sign the QDRO. If this happens, don’t panic. It is possible to file a motion with the court requesting an order for the Court Clerk to sign on behalf of the other party. Contact A People’s Choice if your spouse is refusing to sign a Qualified Domestic Relations Order that has been prepared according to your Judgment of Dissolution.
Step 6 – Obtain Judge Approval of the QDRO
Once the Plan Administrator pre-approves your plan and all parties have signed the QDRO, the original document can be submitted to the court for the Judge’s approval. The QDRO will need to be filed in the court that has jurisdiction over the divorce. The judge will review and sign the order and the Court Clerk will file and enter it in the court records.
Step 7 – Send Certified Copy of QDRO to Plan Administrator
A certified copy of the QDRO is then distributed to the Plan Administrator. There may be other documentation the Plan requires in order to divide the Plan. This might include a supplement that is not filed with the court containing personal information of both parties. The Plan Administrator will review the signed QDRO and process it rather quickly if pre-approval was obtained. Once the retirement account has been divided, the Plan Administrator will set up a separate account for the Alternate Payee with their awarded portion of the retirement account.
What if a party needs the cash now? Rather than rolling the fund over, if one party decides to take a cash distribution from their former spouse’s Plan, the Plan is required to withhold 20% of the awarded amount for Federal income taxes. The gross amount that party receives will be treated as income; however, they will be able to claim the amount which the Plan withholds on their Federal income tax return when they file taxes the following year.
We hope this information has explained the QDRO process from start to finish in an easy-to-understand manner. Be aware that the QDRO process usually takes 2-3 months to complete. Contact A People’s Choice for more information about the steps in the QDRO process and how we can help you draft a QDRO.