What is a Qdro and How Does It Work

It’s normal for individuals to want to focus on their future after a divorce. New living arrangements, new co-parenting schedules, and new budgets will be set. It’s important to move on and find healthy ways to adjust to your new life. But what about beyond that? What about your retirement? That’s when a QDRO will come into play. QDRO stands for Qualified Domestic Relations Order. It’s important to gain a better understanding of how it’s drafted, how long it takes to complete, and who should be involved in the creation of the document. Without a QDRO, you can’t guarantee that you will benefit from an ex-spouse’s retirement savings. In this article, we provide everything you need to know about a QDRO and the drafting procedure.

What is a QDRO?

If you’re only hearing of a QDRO for the first time, you’re not alone. Many couples that are currently going through a divorce may still not know what a QDRO is, despite its high level of importance. That’s because retirement plans are heavily protected under federal law and they used to be excluded from divorce proceedings. However, after 1984, Congress passed a law that made a special exception. They created qualified domestic relations orders (or QDROs), to allow for retirement plans to be split after a divorce or legal separation. In effect, specialists started focusing solely on drafting QDROs and creating legal pathways for 401(k)’s, retirement plans, and pensions to be divided up. In order to complete a QDRO, you’ll need to include:

• The retirement plan owner’s full name and the address of their permanent residence
• The payee’s full name and the address of their permanent residence
• The percentage that the alternate payee will receive
• How the attorneys determined that percentage
• How many payments will be included in the QDRO
• How the payments will be made

How to Obtain a Qualified Domestic Relations Order

Once your divorce is finalized, there will be a judgment regarding the separation of assets. This is when you’ll know if you were granted a portion of your ex-spouse’s retirement plan. However, when a judge simply states that you’ll receive a portion of the retirement plan, that doesn’t automatically make it complete. This is when a QDRO becomes necessary. For instance, let’s say that a judge grants you 50% of your ex-spouse’s retirement plan. This judgment alone doesn’t immediately make it true. It’s at this point that you and your attorney should begin to discuss drafting a QDRO.

How Long Does the QDRO Process Take?

Unfortunately, the procedure doesn’t move along as quickly as most would like. However, it is an important document that passes through a lot of important hands, so it needs to be completed accurately. It’ll take anywhere between three to six months for a QDRO procedure to be completed. Of course, when the two parties and plan administrators agree to the terms of the QDRO, each step moves along quickly and efficiently. If the parties can’t agree to the terms of the QDRO or if one of the plan administrators gets held up along the way, it could take a lot longer. It’s also important to remember that every retirement plan is unique and has different terms and conditions to divide them can take time.

Here are the basic steps in a QDRO process:

1. Begin drafting the QDRO.
2. Obtain a plan administrator’s approval.
3. Have all of the parties involved approve and sign the QDRO.
4. Submit the signed QDRO to the court for final approval by a judge.
5. Send a certified copy of your finalized QDRO back to the plan administrator.

Who is the Alternate Payee?

The spouse that’s required to split their retirement plan is referred to as a participant. The alternate payee is the individual that’s receiving the portion of the retirement plan that’s stated in the Qualified Domestic Relations Order. Most of the time, this will be an ex-spouse that has a lower income than the income earner. However, the alternate payee doesn’t necessarily have to be the ex-spouse. However, it can’t be a close friend or extended relative either. Under federal law, the alternate payee can be a spouse, former spouse, child, or other dependents of the participant.

For More Information on Obtaining a QDRO

If you’ve been granted a portion of your ex-spouses retirement plan, it’s never a good idea to wait to complete a QDRO. As mentioned above, the process can be long, complicated, and include a lot of discussions with attorneys and plan administrators. It’s important to be able to depend on an attorney to explain each step and navigate any legal issues that may arise along the way. The process is a lot less daunting when you’re working with an experienced attorney that can help you to understand your options. Contact a divorce firm today learn more!