A Qualified Domestic Relations Order, normally called a QDRO, is used to transfer an interest in a qualified retirement plan from one person to another. The person whose interest is being transferred is called the “participant” (because they are a retirement plan). The person to whom the interest is transferred is called the “alternate payee.” This is usually the divorcing spouse, but it could also be a child.
When you wish to split your retirement assets as part of the division of your divorce assets, you need to take an extra step and ask the court to approve a qualified domestic relations order (QDRO) which you then submit to your retirement administer. A QDRO is required to give your retirement administrator authority to divide your assets according to what you have agreed in your Marital Separation Agreement.
We prepare QDRO orders for a fixed fee. We can prepare these Orders as part of your divorce documents or after your divorce.
Our fee is $349.00.
The spouse who earned the benefit or contributed to the plan is referred to as the “participant.” The other spouse is the “alternate payee.” The targeted retirement plan must be covered by the Employee Retirement Income Security Act (ERISA) of 1974. Federal law prohibits dividing these benefits without a QDRO.
Another alternative to dividing the assets in a retirement plan is a proposal by one spouse to the other to trade another asset that is outside of the retirement plan, such as an investment, instead of the spouse’s share of the retirement account. This eliminates the need for a QDRO.
A Qualified Domestic Order is used to divided pension assets for retirement funds and pension plans covered under the Employee Retirement Income Security Act. Therefore, a Qualified Domestic Order is only available for the following employer-provided retirement funds and pensions:
- A 401(k) plan.
- A 403(b) plan.
- A 457 plan.
- Profit-sharing plans.
- Money purchase plans.
- Employee Stock ownership plans.
- Tax-Sheltered Annuities
A Qualified Domestic Order technically will not apply to retirement funds and pensions provided by the military, federal government, and state/local governments. Instead of a QDRO there are similar court orders used to divided Military and Federal Government pensions. (“Court Order Acceptable for Processing,” “Retirement Benefits Court Order,” “Order Dividing Military Pay,” etc.).
You can withdraw funds from a retirement account without incurring a 10% penalty if the withdrawal results from a divorce, but to qualify, you must have a QDRO in place.
If you plan to divide retirement assets as part of your divorce settlement, don’t forget to get a QDRO.