A QDRO is defined by the IRS as “a judgment, decree, or order for a retirement plan to pay child support, alimony, or marital property rights to a spouse, former spouse, child or other dependent of a participant.” If the assets in your divorce include certain types of retirement accounts, such as a pension or a 401(k), then you may need a qualified domestic relations order (QDRO) to divide those assets. A QDRO grants the recipient a predetermined amount of their spouse’s retirement assets. It must be compliant with the Employee Retirement Income Security Act (ERISA) and the state’s domestic relations laws.
Note:
There are two common categories of retirement plans that can be divided with a QDRO: defined contribution plans and defined benefit plans.
| Defined Contribution Plans | Defined Benefit Plans |
|---|---|
| 401(k) plans, 403(b) plans, 457 plans, Employee stock ownership plans, Profit-sharing plans | ERISA covered pension plans, Cash balance plans |
| The value of these accounts is readily available and visible on the monthly statements and growth reports. | The value of these accounts is more difficult to determine because the value is estimated based on varying factors over time. |
| With a QDRO, a fixed percentage or amount will be agreed upon to divide | With a QDRO, the actual amount to divide is not known and a percentage is agreed upon instead. Once the spouse with the pension retires, payments to the ex-spouse will begin according to the previously agreed-upon percentage. |
A QDRO typically does not apply to IRAs, deferred annuities, or government retirement plans.
Receiving funds from a QDRO can take anywhere from 2 months to 2 years, and usually occurs within 6-8 months.
Dividing assets requires meticulous attention to detail. Our team at Divergent Family Law is ready to help you protect your rights and maximize your benefits. Call us today.
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