What Is a QDRO and Why Do I Need One?

During a divorce, spouses must divide the marital estate. Through the process of equitable distribution, spouses can split assets like cars, houses, and bank accounts. They can also split debts like credit card balances, car loans, and mortgages. The process is set up to allow you and your spouse to fully disentangle yourselves financially from one another, so you can both move on and live separate lives.

Retirement accounts are one of the assets you and your spouse can divide during a divorce. If either you or your spouse have a retirement account, your attorney will talk to you about whether or not you should divide it. Depending on the type of retirement account, you may need a Qualified Domestic Relations Order (QDRO) to divide it.

A QDRO is an order that gives a person a right to a part of the plan participant’s retirement account. The plan participant is the person who owns the retirement account. While you use QDROs most often in equitable distribution cases, you can also use them to collect money in spousal support or child support cases. Read on to learn more about QDROs.

What does a QDRO do?

A QDRO allows you to transfer money tax free from a retirement account to a child, current or former spouse, or other dependent. You must have one to transfer funds for all retirement accounts covered under the Employee Retirement Income Security Act (ERISA).

What type of accounts need a QDRO?

A QDRO is necessary to transfer funds for the following types of accounts:

• 401(k) plans
• 403(b) plans
• 457 plans
• Employee stock ownership plans (ESOPs)
• Defined benefit monthly benefit plans
• Private pension plans

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What are the requirements for a QDRO?

QDROs must include the following:

• The name and last known mailing address of the participant and the alternate payee
• The dollar amount or percentage (or the method of determining the amount or percentage) of the benefit the alternate payee will receive
• The number of payments or period of time for which the order applies
• The name of each plan for which the order applies

How do you get a QDRO?

Your attorney will draft the order, have a judge sign it, and submit it to the plan administrator. The plan administrator is the person or company in charge of managing the account. While the order requires a judge’s signature, to be truly effective the plan administrator must approve it. Sometimes there are issues with obtaining the plan administrator’s approval. If that happens, your attorney will have to start the process over again by redrafting the order, getting a judge to sign it, and resubmitting it to the plan administrator.

To avoid any potential pitfalls and help ensure the QDRO is approved the first time it’s submitted, your attorney should contact the plan administrator and request a copy of the plan summary, which contains the rules governing the plan. The plan administrator may also have a sample QDRO for your attorney to use as a template to increase the likelihood of approval. In either case, once your attorney drafts the QDRO, they should submit it to the plan administrator for preapproval (if allowed by the plan administrator) before submitting it to the judge for signature. If the plan administrator preapproves the QDRO, it’s extremely likely they will approve it after the judge signs it.

How long does the process take?

It takes about two to three months from start to finish if the plan administrator approves the QDRO the first time your attorney submits it. It can take longer if the administrator rejects it. For this reason, it’s best not to count on having access to the funds very quickly.

Separating the marital estate can be complex, especially if retirement accounts are involved. If you’d like to know more information, contact our office today to set up a consultation. One of our knowledgeable family law attorneys can discuss your legal rights and help you develop a plan for the future.

Additional Reading:

Will My Retirement Account Be Divided During My Divorce?

What to Do with Credit Card Debt in a Divorce

How to Make a Budget

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