If you've been researching QDROs, you've probably come across a lot of acronyms, terms, and legalese that cause confusion (and maybe a headache or two).
Participants, nonmembers, payees, and more
First, it's important to understand how you will be referred to during the process (and in our resources):
- If you are the employee with the retirement plan being divided, you will be referred to as the participant, the employee, or the employee member.
- If you are the spouse who will be taking funds from your ex's retirement plan, you will be referred to as the nonmember, the alternate payee, the payee, or the former spouse.
Now, let's break down the rest of the jargon.
Defined benefit plan
Offered by public and private employers, this type of retirement plan is either (1) a traditional pension or retirement plan that pays monthly over time once you start taking your benefits, or (2) a cash balance plan that provides a lump-sum payment with the option to receive monthly payments over time.
Defined contribution plan
Offered by public and private employers, a defined contribution plan deposits pretax money directly into an account for each employee. Contributions may be made by the employee, the employer, or both. The retirement plan could be any of the following: a 401(k) plan, profit-sharing plan, savings plan, money purchase pension plan, employee stock ownership plan, 401(a) plan, 457(b) plan, 403(b) plan, tax-sheltered annuity, thrift plan, or deferred compensation plan.
Domestic relations order (DRO)
A domestic relations order (DRO) is a court order that requires the division of a public retirement plan. (State, federal, and military employees, this is you.)
ERISA
ERISA is an acronym for the Employee Retirement Income Security Act of 1974. All qualified retirement plans are governed by ERISA. This federal law has a subsection that allows for direct payment of a retirement benefit to a former spouse for marital or community property or for child or dependent support.
Joinder pleading
A "joinder" is a California-only procedure. In this procedure, the retirement plan is made a party to the divorce by filing "joinder pleadings." The pleadings formally put a retirement plan on notice that there may be a marital property claim against those benefits.
You must "join" the retirement plan in a dissolution action before the domestic relations order will be processed. This applies to all California public plans and some private plans if the rules require it. Most private plans governed by ERISA do not require the service of joinder pleadings.
Notice of adverse interest
A notice of adverse interest provides notice to a plan of a divorce or pending divorce. In many cases, this triggers a hold on the plan benefits until a QDRO is served on the plan.
QDRO
A Qualified Domestic Relations Order (QDRO) is a court order used to divide a private retirement plan.
Frequently Asked Questions
What is a QDRO?
A Qualified Domestic Relations Order (QDRO) is a court order that allows retirement accounts like 401(k)s or pensions to be divided without tax penalties.
When is a QDRO required?
When dividing employer-sponsored plans such as 401(k)s and pensions. IRAs follow separate rules and do not need a QDRO.
Who prepares a QDRO?
Usually an attorney or QDRO specialist drafts the order to meet federal and plan-specific requirements.
Does a QDRO apply to all retirement accounts?
No. It applies only to ERISA-governed plans like 401(k)s and pensions, not IRAs.
How long does it take to process a QDRO?
Several months, since it must be drafted, approved by the court, and accepted by the plan administrator.
Why is a QDRO important in divorce?
Without one, dividing retirement funds could trigger taxes, penalties, or delays.
How to Obtain a QDRO in Divorce
Identify retirement accounts that need a QDRO
Check if the accounts are employer-sponsored like 401(k)s or pensions.
Hire a professional to draft the QDRO
Work with an attorney or QDRO specialist familiar with the requirements.
Submit the draft for pre-approval
Send the draft QDRO to the plan administrator before court submission.
Obtain court approval
File the order with the divorce court for a judge’s signature.
Provide final QDRO to plan administrator
Submit the signed QDRO to the administrator to process the division.
Confirm account division
Verify that funds have been allocated according to the order.
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