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Guide to QDROs in Colorado

People are often confused about how retirement plans are divided in divorce settlement agreements. That's where Qualified Domestic Relations Orders, or QDROs, come into play. A QDRO is a court order used in divorce proceedings to divide retirement benefits. 

Understanding QDROs is crucial for divorcing couples because these orders can significantly impact each party's financial future.

Should you work with a financial advisor on your divorce settlement? The benefits may be worth the cost. Read about financial advisors and their role in divorce mediation here.

How do QDROs work in Colorado?

In Colorado, as in other states, a QDRO is a court order that allows an alternate payee, usually the ex-spouse, to receive a portion of the benefits the other spouse earned through an employer-sponsored retirement plan. A QDRO establishes the ex-spouse's legal right to receive a designated percentage or amount of the retirement plan benefits.

The execution of a QDRO in Colorado involves several steps. First, the court must approve a drafted QDRO. Then, it must be accepted by the retirement plan administrator of the plan account. Once approved, the QDRO ensures that a fair portion of the retirement account is allocated to the former spouse.

Can a Colorado court divide a retirement plan in divorce?

Colorado is an equitable distribution state. This means that in the marital property settlement, marital assets — including pension benefits — are divided in a manner that the court deems fair but not necessarily equal. A QDRO can be instrumental in this process, as it legally enforces the division of a retirement plan.

If a couple is unable to agree on how to split a retirement plan, a Colorado court can issue a QDRO to divide the assets. It's important to note that not all retirement assets are subject to division. Only those accumulated during the marriage are considered marital property and thus eligible for division.

What types of plans do QDROs cover?

QDROs can be used to divide most types of employer-sponsored retirement plans. This includes:

  • Defined contribution plans, such as 401(k)s, 403(b)s, and profit-sharing plans: In these cases, the QDRO will specify a fixed amount or percentage of the account balance to be transferred to the ex-spouse.
  • Defined benefit plans, or pension plans: Here, the QDRO may establish a formula for determining the dollar amount payable to the ex-spouse, often based on the years of marriage during the employee's years of plan participation.

It's important to note that QDROs do not apply to Individual Retirement Accounts (IRAs). Division of these accounts is usually handled through the divorce decree or separation agreement.

Read: What Happens if a QDRO Is Not Filed?

When and how to file a QDRO in Colorado

Filing a QDRO in Colorado should be done as soon as possible after the divorce decree is issued; you do not have to be of retirement age to do this.

There is no statutory time limit for filing a QDRO, but a delay could lead to complications, particularly if the plan participant retires or dies before the QDRO is filed. Also note that many retirement plans have their own limits on when they'll accept a QDRO post-divorce, and that window can be as short as 90 days.

The cost of filing a QDRO can vary depending on the complexity of the retirement assets and whether an attorney is involved. Typically, costs can range from a few hundred to several thousand dollars.

Can Hello Divorce help me file a QDRO?

Yes, Hello Divorce offers resources with key information to help you understand what a QDRO is and how to use one in divorce. Our trusted experts at SimpleQDRO, a legal technology company for the pension division founded and backed by a team of nationally recognized QDRO and valuation experts, can help. 

We can guide you through this, providing the expert help and resources you need along the way. Schedule a free 15-minute phone call to learn more.

Helpful: QDRO Glossary