Divorce and retirement: an introduction to QDROs

Most couples who have been married for long periods of time have invested large amounts of time, effort and expense in their relationship. This process of creating a life together generally combines their emotional and financial assets. However, having large amounts of retirement assets can give rise to complications if they decide to divorce.

For couples who have been investing in their futures for years, they have probably amassed a significant amount of their assets in the form of retirement savings. Since marital assets are usually divided during divorce, should retirement assets be divided as well? This is where QDROs come in.

What is a QDRO?

Once a couple decides to dissolve their marriage, they will have to go through the task of separating their lives and their assets. Even though property division is a regular aspect of divorce proceedings, retirement and pension plans usually only pay out to the sole owner of the plan. It is at this point where QDROs become important.

A Qualified Domestic Relations Order (QDRO) is a judicial order. It divides one spouse’s retirement and/or pension plan between them, their spouse or their dependent. With a QDRO, a spouse’s retirement and pension plan can be divided just like other marital property.

What plans are eligible?

Unfortunately for some couples, only retirement and pension plans that fall under the Employee Retirement Income Security Act (ERISA) are eligible for QDROs. ERISA is a federal act responsible for setting minimum standards for most private health care and pension plans.

How do you get a QDRO?

According to the Labor, QDROs can be “issued by any state agency or instrumentality with the authority to issue judgments, decrees, or orders, or to approve property settlement agreements, pursuant to state domestic relations law (including community property law).”

Additionally, it must include certain pieces of information including,

• The names and addresses of plan owners and payees
• The names and information of plans applied to the QDRO
• The percentage of benefits that will be given to each payee
• Payment information (payment schedules, number of payments, etc.)

Even though a QDRO may seem relatively straightforward, they can require large amounts of very specific information. Because of all of the information involved and the impact a QDRO can have, these documents can become complicated very quickly.

If you are considering drafting and submitting a QDRO, it is highly recommended that you obtain the services of an experienced and knowledgeable legal professional. They will be able to work with you to ensure that your best interests are the highest priority.