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 participant in a retirement plan). The person to whom the interest is transferred is called the “alternate payee”. This is usually the divorcing spouse, but 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 you assets according to what you have agreed in your Marital Separation Agreement.
We can prepare your QDRO as part of your divorce documents. Our fee is $299.00, and this fee is additional because of the complexity of a QDRO order. ORDER HERE.
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 one that’s 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 which is outside of the retirement plan, such as an investment, in stead of the spouse’s share of the retirement account. This eliminates the need for a QDRO.
You can withdraw funds from a retirement account without incurring a 10% penalty if the withdrawals is the result of a divorce, but in order to qualify you have to 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.