The qualified domestic relations order (QDRO) 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 or pension plan based on the terms of your divorce decree. If you’re trying to understand the QDRO process from start to finish, read on to learn more. Then, we’ll show you how A People’s Choice can help!
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. Specifically, the QDRO divides retirement and pension plans such as 401(k), 403(b), and 457 as well as federal and state civil service plans and IRAs. Further, the QDRO formally recognizes 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.
The QDRO Process From Start to Finish
Step 1 – Gather Information
Before initiating the QDRO process, you need to gather information such as the plan name and administrator of the specific benefits you’re dividing. Then, you must complete your divorce decree to determine the amount of the retirement or pension plan you’re dividing. Note that you must enter a judgment in your divorce proceedings prior to continuing with the process.
To prepare the QDRO, you will need to collect information about your former spouse and 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. Additionally, you will need the exact name of the retirement plan as well as the name and address of the plan administrator. You may usually obtain this information from the employer of the participant spouse.
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 you come across during this process. If the plan administrator provides you with their plan package, you must provide this package to the legal professional assisting you in drafting the QDRO.
Step 2 – Draft the QDRO
Once you obtain the necessary information, it’s time to draft your QDRO as a stipulated order, assuming both parties have agreed to the manner in which the assets will be divided. Furthermore, the QDRO should be drafted in compliance with the procedures from the plan administrator. For help drafting the QDRO to meet these criteria, hire the help of a legal professional. Contact A People’s Choice 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 approval.
However, you may avoid this optional step in the event the other party acts irrationally. In fact, your former spouse does not have to sign the QDRO at this point.
Step 4 – Obtain Plan Administrator Approval
Next, send a copy of the QDRO to the plan administrator for approval. Oftentimes, the plan administrator may request changes to the document.
Note that military and federal civil service pensions are not pre-approved by the plan administrator. Otherwise, QDRO pre-approval can ensure approval once the judge authorizes the order.
Step 5 – Have All Parties Sign the QDRO
After the plan administrator has pre-approved the QDRO, both parties should sign the document. Additionally, 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 spouse may refuse to sign the QDRO. If this happens, don’t panic. You can 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 QDRO that you have prepared according to your judgment of dissolution.
Step 6 – Obtain Judge Approval
Once the plan administrator pre-approves your plan and all parties have signed the QDRO, you can submit the original document to the court for the judge’s approval. Note that you will need to file the QDRO with the court that has jurisdiction over the divorce. Then, the judge will review and sign the order and the court clerk will file and enter it in the court records.
Step 7 – Send a Certified Copy to the Plan Administrator
Finally, it’s time to send a certified copy of the QDRO to the plan administrator. Additionally, the plan may require other documentation to divide the plan. This might include a supplement containing personal information about both parties that is not filed with the court .
If you obtained pre-approval, the plan administrator will review and process the signed QDRO rather quickly. Then, 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 account.
However, 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 will withhold 20% of the awarded amount for federal income taxes. In this situation, the gross amount the party receives will be treated as income. However, they will be able to claim the amount the plan withholds on their federal income tax return when they file taxes the following year.
Need more help? Contact A People’s Choice for more information about each step in the QDRO process from start to finish, and how we can help you draft a QDRO.