A QDRO (pronounced ‘Quad-ro’ for those in the know) is a court order which is used to divide a retirement plan. The actual order may be a Qualified Domestic Relations Order for a private plan or Domestic Relations Order (DRO) for a public plan. A QDRO can also be used to collect alimony or child support.
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 other court orders awarding one spouse a portion of the other spouse’s retirement benefits unless the court order is a QDRO. Also note that for domestic partnerships, direct payments to a former spouse from a retirement plan can be paid from a state public plan with a DRO but cannot be paid from any private employer plan or federal plan.
Preparing a QDRO on your own is possible, but they are complicated and they are not enforceable if they are not prepared correctly. There are laws to protect retirement division but very 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 very confusing and are usually drafted to benefit the plan, and so they are not necessarily trustworthy. Searching online for QDRO help can be overwhelming, as there are several bad preparers out there that promise low rates but deliver even lower quality – translating to QDROs that are not. QDROs are specific to each plan and can be complex. There is no one-size-fits-all QDRO. Getting it wrong may lead to permanent loss of survivor benefits.
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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 – a defined benefit plan and a defined contribution plan.
Defined benefit plans are either (1) traditional pension or retirement plans (usually monthly payments over time) or (2) cash balance plans (lump sum payment with the option for monthly payments over time). Many mid-to-large size private companies have defined benefit plans for their employees (e.g. AT&T, Boeing, Disney). Examples of state public-defined benefit plans are 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) Types of federal public defined benefit plans are 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 have pretax money deposited directly into an account for each employee. Contributions may be made by the employee or the employer or a combination of both. Almost all are paid as a lump sum payment. Most people seem to refer to defined contribution plans as 401ks but the plan may be one of the following: 401(k) plans, profit-sharing plans, savings plans, money purchase pension plans, employee stock ownership plans (ESOPs), 401(a) plans, 457(b) plans, 403(b) plans, tax-sheltered annuities, thrift plans, or deferred compensation plans. Most private and public plans offer their employees defined contributions plans.
Mid to large private and public employers likely have both a defined benefit plan and a defined contribution plan for their employees.
Very often the parties unknowingly only divide one of the two plans in a divorce. For example, the divorce judgment will award the marital or community property interest in one party’s 401k. But that party also has a traditional pension which will be paid monthly for a lifetime but at a later time. That is the million-dollar asset and it is often missed!
Please note that this resource is meant for informational purposes only and does not constitute legal advice. Reading this blog does not create a lawyer-client relationship with Levine Family Law Group, Hello Divorce, QDROCounsel, LLC, or QDRO Benefits Law Group. This blog is written from the perspective of existing law and all attempts are made to be accurate and current on all legal developments. However, please do not make decisions that will affect your future based on things you’ve read on our website. Instead, consult with a Certified Family Law Specialist, like those of LFLG – or any other you prefer. The same goes for QDRO-specific questions: you may consult with QDROCounsel, LLC or QDRO Benefits Law Group or any other QDRO specialist you prefer – but be sure to seek out sound legal advice that pertains specifically to the facts of your case.