- The risk of preparing your own QDRO
- Getting QDRO help
- Defined benefit plans
- Defined contribution plans
When you get a divorce, the only way to get the money paid from one spouse's retirement account to the other spouse is with a QDRO. Simply stating that the spouse is awarded a community or marital property interest in a retirement asset will not divide the benefit.
Retirement plans are not required to follow court orders awarding one spouse a portion of the other spouse's retirement benefits unless the court order is a QDRO. Also of note: F or domestic partnerships, direct payments to a former spouse from a retirement plan can be paid from a state public plan with a DRO, but it cannot be paid from any private employer plan or federal plan.
The risk of preparing your own QDRO
It's possible to prepare your own QDRO, but they are complicated, and they are not enforceable if incorrectly prepared. There are laws to protect retirement asset division, but few people know how to divide them. It's hard to know who to trust. Some retirement accounts have QDRO forms which are provided to the parties in divorce by the retirement plan. But these sample QDROs can be confusing and are usually drafted to benefit the plan, so they are not necessarily trustworthy.
Searching online for QDRO help can be overwhelming, as there are several bad preparers out there who promise low rates but deliver even lower quality. QDROs are specific to each plan and can be complex. There is no one-size-fits-all QDRO. Getting it wrong could lead to permanent loss of survivor benefits.
Getting QDRO help
QDROCounsel is a legal technology company for the pension division founded and backed by a team of nationally recognized QDRO and valuation experts. QDROCounsel partners with Hello Divorce to make sure you have the support, coaching, and guidance from our experts, including QDRO attorneys. Generally, you must do a separate QDRO for each plan. Each retirement plan is governed by different rules depending on the plan type (i.e., 401(k), pension plan, 403(b)). Each QDRO must be tailored to the requirements of each plan. There are two types of retirement plans: defined benefit plans and defined contribution plans.
Defined benefit plans
Defined benefit plans are either traditional pension or retirement plans (usually monthly payments over time) or cash balance plans (lump sum payments with the option for monthly payments over time). Many mid-size to large private companies have defined benefit plans for their employees (e.g., AT&T, Boeing, Disney). Examples of state public-defined benefit plans include the Public Employees Retirement System (PERS) and the State Teachers' Retirement System (STRS). Large county plans also have their own defined benefit plans (e.g., SFERS, LACERA in California). Federal public-defined benefit plans include the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) for federal employees and the Armed Forces Retirement System for military members.
Defined contribution plans
Defined contribution plans have pretax money deposited directly into an account for each employee. Contributions may be made by the employee, the employer, or a combination of both. Almost all are paid as a lump sum payment. Although many people refer to a defined contribution plan as a 401(k), the plan may be one of the following:
- 401(k) plan
- Profit-sharing plan
- Savings plan
- Money purchase pension plan
- Employee stock ownership plan (ESOP)
- 401(a) plan
- 457(b) plan
- 403(b) plan
- Tax-sheltered annuity
- Thrift plan
- Deferred compensation plans
Knowing what you have
Most private companies offer their employees defined contribution plans. Mid-size to large private and public employers likely have both a defined benefit plan and a defined contribution plan for their employees. Often in divorce, parties unknowingly divide just one of the two plans. For example, the divorce judgment might award the marital or community property interest in one party's 401(k). That party may also have a traditional pension to be paid monthly for a lifetime – but at a later time. That is the million-dollar asset, and it is often missed!
FAQs About QDROs
What is a QDRO?
A Qualified Domestic Relations Order, or QDRO, is a court order that allows retirement plans to be divided between spouses or former spouses during divorce without triggering taxes or penalties.
Why is a QDRO important in divorce?
A QDRO is important because it gives the retirement plan administrator legal authority to transfer funds to a former spouse, ensuring both parties receive their fair share.
Which retirement accounts require a QDRO?
Most employer-sponsored plans like 401(k)s and pensions require a QDRO for division. IRAs and some other accounts follow different rules and do not need one.
Who prepares a QDRO?
A QDRO is usually drafted by a lawyer or QDRO specialist. It must be approved by the court and then accepted by the plan administrator.
Can I file a QDRO without a lawyer?
It’s possible, but many people seek professional help because QDROs must meet strict legal and plan requirements. Errors can cause delays or financial loss.
What happens after a QDRO is approved?
After the court signs and the plan administrator accepts the QDRO, the retirement funds are divided according to the order, often by transferring assets into the recipient’s account.
Step-by-Step Guide: How to Obtain a QDRO
Review your divorce agreement
Confirm that retirement assets need to be divided and identify the specific plans involved.
Gather retirement plan details
Collect account numbers, plan names, and contact information for the plan administrator.
Draft the QDRO
Prepare the QDRO using legal forms or a professional service, making sure it meets both state law and plan requirements.
Submit the draft to the plan administrator
Many plans review draft QDROs before court filing to ensure compliance with their rules.
File the QDRO with the court
Submit the QDRO for judicial approval and obtain a signed copy from the judge.
Send the QDRO to the plan administrator
Provide the signed order to the plan administrator so they can process the division of funds.
Receive your share
The plan administrator transfers the funds as ordered, usually into your own retirement account.
What's after divorce?
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