QDRO FAQ

Why Do I Need a Specialized QDRO attorney to prepare the document? Why can my family law attorney who helped me with my divorce not also help me with this document? 

It is always the best idea to have a licensed attorney prepare your court documents. For many people, their right to receive a portion of their former spouse’s retirement account is the best valuable asset of their marriage. Often an attorney will be able to better understand, advocate for and present to the court, if needed, the terms of the retirement division order that will most benefit the party that they are working for. When retained by both parties to prepare the order, the attorney has the obligation to ensure that the parties jointly understand any options available to them, knowingly select fair options and that the interests of both parties are considered. Often there are significant subtleties and repercussions in how an order is drafted and in the rights it provides to each party. Given the significant value (in many families, retirement assets are the most valuable assets of the marriage), it simply makes sense to ensure that the final order prepared to protect this asset is carefully and accurately prepared.  

Clients sometimes ask why they need a specialized QDRO attorney if the Plan Administrator provided a sample or form document. While the model document is often a good starting point for the preparation of the order, it generally does not address all of the needed and necessary issues in the settlement agreement. Further, the sample/plan document is often written in a manner that best protects the plan member/employee and not the alternate party/recipient spouse. Further, many model/sample documents provide a choice of many different alternative paragraphs. Most family law parties tell us that they don’t understand the “legalese” of the options and thus, it is difficult for them to understand the ramifications of choosing various options, let alone advocating for the option that is best or most beneficial for them. Again, because a retirement asset is often one of the most significant asset of the marriage, it is important to clearly understand the choices available, the risks and benefits of those options and then make a well-informed choice for your interests.  

Why Should QDROs be Pre-Approved by the Plan Administrator Before Being Filed with the Court?  

An order is not designated as qualified until the Plan Administrator approves- or qualifies- the order. This is the case even if the order has been signed and approved by the judge. This means that often, in addition to the legal requirements of a draft QDRO, the plan will require specific language or other provisions that meet the requirements of the Plan. If this occurs, you will be required to get an amended QDRO prepared, resubmitted and signed off on by the judge. At Pingel Family Law, we obtain pre-approval whenever possible from the Plan at issue so that we can try to minimize and reduce delays.  

What if My Former Spouse and the Plan Administrator Refuse to Furnish Information about the Plan I Need? 

Hopefully, your family law attorney already obtained this information through discovery in the underlying case. If your family law attorney does not have this information, and your former spouse refuses to give this information, a subpoena or other action may have to take place in regard to the plan administrator to obtain the necessary and needed information.  

Does My Former Spouse Have to Sign the QDRO?  

The QDRO is designed to be written as an agreed order between you and your former spouse. Generally, you both must sign it and approve it to be expeditiously submitted to the court/judge for signature and entry. If your former spouse refuses to sign off on the document, he or she is likely failing to cooperate with the terms of your settlement agreement or Judgment which require cooperation with the entry of a QDRO. By refusing to cooperate in a reasonable way, your former spouse could be held in contempt of court. However, it is usually most cost-efficient and time-efficient to try to work with your former spouse to diligently try to obtain their cooperation before moving forward with a motion to enter a QDRO and/or a contempt action.  

What is a QDRO? 

QDRO stands for Qualified Domestic Relations Order.  A QDRO is a legal document, typically needed following divorce proceedings, that recognizes a spouse, former spouse, child, or other dependent being entitled to receive a pre-determined/court ordered portion of the account owner’s retirement plan assets.  This can include some or all of the other parties’ retirement plan or pension. A QDRO can order payment for child support, alimony, or marital property rights.  Typically, QDRO’s are prepared during the divorce proceeding, however they can be filed years after a divorce is finalized.  

According to the U.S. Department of Labor, to be recognized as a QDRO, an order must be a “domestic relations order.”  This simply means it must be a judgment, decree, or order that is made pursuant to the state’s domestic relation law.  A state authority must actually issue a judgement, order, or decree.  In other words, the parties cannot simply sign a property settlement agreement for a QDRO.  Mentioning the specifically dollar amount in a divorce decree will also not suffice.  

The purpose of a QDRO is to fairly divide assets in a qualified retirement plan.   This legal document directs the account administrator to divide the pensions in accordance to the divorce decree in compliance with the company pension plan guidelines and the Employee Retirement Income Security Act (ERISA). 

Mandee Rowen Pingel has extensive experience preparing QDRO’s for a variety of pension plans, state plans, retirement accounts, including division of military retirement accounts, federal government pension plans under the CSRS and FERS, and private company plans. Mandee is privileged to receive a multitude of referrals from valued legal colleagues, plan administrators and financial advisors.  

What is the difference between a QDRO and DRO? 

A QDRO (Qualified Domestic Relations Order) and a DRO (Domestic Relations Order) are both legal documents used in family law, particularly during a divorce or separation to address the division of retirement assets.   While there are some similarities, the two orders serve different purposes. 

QDRO 

• A QDRO is a specific type of domestic relations order that has been reviewed and approved by the retirement plan administrator and determined to meet the requirements of the Employee Retirement Income Security Act (ERISA). 
• Division of Retirement Assets: A QDRO is used to divide retirement assets, such as 401(k)s, pensions, and other qualified retirement plans between divorcing spouses.  If specifies the terms and conditions of the division, including the amount or percentage each party is entitled to receive. 
• Tax Treatment: One of the key benefits of a QDRO is that it allows for the tax-advantage transfer of retirement assets without incurring early withdrawal penalties.  The receiving spouse may roll over their share of the assets into their own qualified retirement account or receiving them directly, with taxes deferred until withdrawal. 
• Plan Administrator Approval: A QDRO must be approved by the plan administrator of the retirement account before the assets can be divided and distributed.

DRO 

• Broader Category: A DRO is a more general term that encompasses a variety of court orders related to family law matters, including division, child-support, alimony, and the division of retirement assets.  
• Non-Qualified Plan: DROs can be used for the division of non-qualified retirement plans, such as individual retirement accounts (IRAs), as well as other family law matters.  Unlike QDROs, DROs do not necessarily have to meet specific federal requirements or undergo plan administrator approval. 
• Tax Implications: The tax treatment of assets divided through a DRO may differ from that of a QDRO.  For example, when dividing an IRA through a DRO, the recipient may incur taxes and early withdrawal penalties, depending on how the division is structured.  

What is a Joint and Survivor Annuity? 

A Joint and Survivor Annuity (JSA) is a type of pension payment option that can be addressed in a Qualified Domestic Relations Order when dividing retirement plan benefits in the context of a divorce or legal separation. This option is commonly associated with defined benefit pension plans, and it provides income for both the plan participant (the employee) and their spouse or another beneficiary, typically the ex-spouse, after the participant retires. 

In a pension plan with a JSA option, the plan participant has the choice to receive their retirement benefits in the form of a lifetime annuity.  With this option, the participant receives monthly payments for the rest of their life, and upon their death, a portion of the monthly payments continues to be paid to a designated survivor, usually their spouse.  

The survivor benefit is a percentage of the participant’s original monthly benefit that is paid to the designated survivor (spouse or ex-spouse) after the participant’s death.  Commonly, the survivor receives 50% to 100% of the original benefit, depending on the plan’s term and the choices made by the participants.  

When retirement benefits in a divorce through a QDRO, the JSA option becoming significant if the divorcing spouse agree to or are ordered to provide a portion of the pension plan benefits to the non-employee spouse.  The QDRO will specify how the survivor benefits should be divided between the participants and the alternate payee. 

For example, if the plan participant chooses a 100% JSA option, it means that upon their death, their ex-spouse (the alternate payee) will continue to receive the same monthly benefit for the rest of their life.  The QDRO would outline the division and administration of this survivor benefit.  

Not all pension plans offer a JSA which is why it is crucial to consult with legal advice. 

Is my retirement account marital or non-marital? 

In Missouri and Kansas, the division of property in divorce is guided by the principles of equitable distribution.  Marital property typically includes assets and debts acquired by either spouse during the marriage, regardless of which spouse’s name is on the title.  This includes retirement accounts and pensions earned or funded during the marriage.  

Retirement accounts can be considered marital if they were acquired or funded during the marriage.  The portion of the retirement account or pension that was earned or contributed to during the marriage is generally subject to division in a divorce.  

Do I have a Defined Contribution Plan or a Defined Benefits Plan? 

• Defined Contribution Plans are a type of retirement savings plans that specifies how much money is contributed to an individual’s account, either by the individual, the employer, or both, but does not guarantee a specific retirement benefit amount.  Instead the eventual retirement benefit is based on the contributions made and the investment performance of those contributions over time.   
  • 401(k) Plan: A popular retirement plan offered by many employers, allowing employees to contribute a portion of their salary on a pre-tax or after-tax basis.  Employers may offer matching contributions up to a certain limit.  The account’s value depends on contributions and investment performance. 
  • 403(b) Plan: Similar to a 401(k) but typically offered by nonprofit organizations and schools.  It allows employees to contribute pre-tax and post-tax earnings to a tax-deferred retirement account. 
  • Thrift Savings Plan: A retirement savings plan for federal employees, including military personnel. 
• Defined Benefits Plans, often referred to as a pension plan, is a type of retirement plan that promise participants as specific, predetermined retirement benefit based on a formula, typically considering factors such as salary, years of service, and age at retirement.  Unlike a Defined Contribution Plan, a Defined Contribution Plan offers a guaranteed benefit that the participant will receive upon retirement.  
  • Pension Plan: These plans promise a specific, predetermined retirement benefit to participants based on factors such as salary, years of service, and a predetermined formula.  The employer is responsible for funding and managing the plan, and participants receive a fixed monthly benefit in retirement.  
  • Cash Balance Plan: A type of defined benefit plan that credit participants with a certain percentage of their annual salary plus interest credits.  The plan’s benefits are expressed as an account balance, offering more portability and flexibility than traditional pension plans. 
  • Hybrid Plans: Some plans combine elements of both defined contribution and defined benefit plans, allowing participants to have a mix of individual account balances and guaranteed benefits. 

Who can be an “alternate payee?” 

An alternate payee can only be: 

• A spouse or former spouse: A common alternate payee is the current or former spouse of the plan participant.  Divorce or legal separation proceedings often result in a QDRO to divide retirement benefits between spouses. 
• Children: In some cases, a QDRO may specify that children of the plan participant are alternate payees, typically to provide for child support or educational expenses. 
• Dependents: Certain dependents of the participant may be eligible as alternate payees, depending on the terms of the QDRO and the needs of the dependents.  
• Other beneficiaries: QDROS may sometimes include other beneficiaries, such as a dependent parent or individual named in the property settlement agreement.  

If an alternate payee is a minor or legally incompetent, the order can require payment to someone with legal responsibility for the alternate payee.  For example, a guardian in the case of a child or a trust as agent for the alternate payee.

What is the process? 

Even before the QDRO process begins, a party can file a joinder.  A Joinder is a legal document served on the Plan before the QDRO is drafted.  This will notify the plan administrator that someone is claiming a right to some of the pension benefits.  Once the plan administrator is notified, it generally will not make any distributions to anyone until it receives the QDRO.  Some plans require a Joinder will others do not. 

• QDROs are typically drafted by your attorney. 
• The retirement plan administrator then reviews the QDRO to make sure it is compliant with the terms of the retirement plan.  This is important if the plan rejects an order already signed by the court, you will have to file another order with the court and obtain the judge’s signature to amend the first one. 
• The QDRO is then signed off by the judge. 

The mere drafting of a QDRO or similar order show take no more than a few business days.  However, if the case involves a retirement account, handling the QDRO generally takes anywhere between 8-16 weeks from beginning to end.  If the particular plan is complex, it could take up to twelve months.   

QDROs can be legally complex and an error in the QDRO could lead to delays or problems when it is time to access the funds which is why it is important to have a legal professional take care of your QDRO. 

A QDRO is a stipulation (an agreement) between you and your former spouse and therefore both of you must sign it, in addition to the judge’s signature.  If a party refuses to sign the QDRO, that likely means that party is violating the Court’s order.

What plans qualify for a QDRO? 

Typically a QDRO can be drafted if the parties share:

• A private pension plan 
• A 401(k) plan 
• A 403(b) plan 
• A 457 plan 
• Employee Stock ownership plans 
• A defined benefit plan 

Does my IRA qualify for a QDRO? 

 Individual Retirement Accounts (IRAs) do not typically qualify for a QDRO.  IRAs are not typically considered employer-sponsored retirement plans, and they are not governed by the Employee Retirement Income Security Act, which is the federal law that primarily regulates QDROs.  Instead, IRAs are individual accounts that people can open on their own, and they are not subject to QDROs. 

However, in the context of a divorce or legal separation, assets held in IRAs can still be divided and allocated to one of the spouses a part of the property settlement.  The division of IRA assets is typically done through the divorce settlement agreement or court order, but it does not involve a QDRO. 

What are QDRO requirements? 

A QDRO is only valid for retirement plans covered by the Employee Retirement Income Security Act or ERISA.  This includes qualified plans, such as 401(k)s, but they do not cover IRAs.  

A QDRO requires specific information including: 

• Name and mailing address of the plan participant 
• Name and mailing address of each payee 
• Name of each plan to which the order applies 
• Dollar amount or percentages of the benefit to be paid 
• Number of payments or time period to which the order applies  

A QDRO is also required to be approved by both the plan administrator and a court.  

A QDRO can be paid out in a number of ways including a lump sum, installment payments, or transferring the funds to another retirement account.  A QDRO can also cover more than one plan of the same or different employers as long as each plan and the assignment of benefit rights under each plan are clearly specified.

What about taxes? 

In most cases, taxes must be paid on money from a QDRO.  Once the distribution is made to a former spouse, the former spouse becomes responsible for any taxes due.  Alternatively, the former spouse can often roll over the assets received from a QDRO just the same as an employee could receive a distribution and roll it over into another retirement account.  However, a QDRO distribution that is paid to a dependent, such a minor child, is taxed to the plan’s participant.

Are there limits to a QDRO? 

• The Court order cannot force a retirement plan to disburse any benefit amount or option that is not provided through the plan.  
• The QDRO cannot require increased benefits, on the basis of actuarial value, from the retirement plan.   
• Benefits cannot be required from a plan for an alternate payee when those benefits are already allocated to another alternate payee under the decree of a previous QDRO. For example, when there are subsequent divorces, the earliest take priority for the designated benefit amount.  
• QDROs are typically only used to divide retirement benefits from employer-sponsored plans. 

Can a QDRO be part of any other proceeding besides a divorce? 

Yes!  A domestic relations order that provides for child support or recognizes marital property rights may be a QDRO without a divorce proceeding.

Does a military retirement account qualify for a QDRO? 

A military QDRO can be used to divide a military retirement account, but technically is is not referred to as a QDRO, rather a similar order is used.  This order is known as a “Military Pension Division Order” or “Military Retirement Division Order.” 

The Uniformed Services Former Spouse Protection Act (USFSPA) governs the division of a servicemember’s military retired pay.  The USFSPA, itself, does not grant any rights to a former spouse regarding the service member’s retired pay, instead it allows state courts to treat disposable military retired pay as “marital property” and divide it in a divorce proceeding.

The military pension division order may specify the percentage or amount of the retirement benefits the former spouse is entitled to receive. These benefits are typically paid directly from the Defense Finance and Accounting Service (DFAS) to the former spouse on the service member becomes eligible for retirement.

While it is a common misconception that a service member and a spouse must have been married for at least ten years for a Court to divide the military retirement, the USFSPA does not include any such requirement and it not an absolute requirement in all cases. 

The 10/10 rule refers to the requirement that the marriage of the divorce spouses must have overlapped with at least ten years of the service member’s creditable military service for direct payment of the former spouse’s portion of the military retirement benefits by the DFAS. 

What are some common QDRO mistakes? 

QDROs can be tricky which is why it is important to get a lawyer to assist you.  Below are some common mistakes. 

• Incomplete information: Failing to provide all the necessary information, such as participant’s name, plan name, and account details, can lead to delays and rejections. 
• Unclear Language: The language in the QDRO should be clear and unambiguous. 
• Failure to review the Plan’s specific requirements. 
• Incorrect Valuation: Using incorrect evaluation methods or outdated information when determining the value of the marital portion can result in an inequitable division.  
• Incorrect Distribution Instructions: Failing to correctly specify how and when benefits will be distributed to the alternate payee can lead to misunderstandings or undesired tax consequences.  

So why get a QDRO?

• Asset division- One of the primary purposes of a QDRO is to divide retirement assets between divorcing spouses.  It allows for the orderly and equitable division of retirement benefits, such as 401(k)s, pensions, and IRAs, without tax penalties or early withdrawal fees.  Without a QDRO, you may have to pay taxes and penalties for accessing these assets prematurely. 
• Protection of your rights- If you are the non-employee spouse in a divorce, a QDRO safeguards your legal rights to a portion of your spouse’s retirement benefits.  It ensures that you receive what you are entitled to as part of the property settlement. 
• Avoiding tax consequences- A QDRO enables the tax-advantage transfer of retirement assets from one spouse to another.  Without a QDRO, the transfer might be treated as a taxable event. 
• Simplifies Distribution- a QDRO outlines the specifics of how the retirement assets will be divided and when they will be distributed.  This can prevent disputes and complications down the road providing a clear plan for both parties. 
• Retirement Security- If you are the alternate payee, a QDRO ensures that you can maintain financial security in your retirement years.  It allows you to share in the benefits your spouse earned during the marriage.  
• Compliance with legal requirements- Many retirement plans, particularly employer-sponsored plans, require a QDRO to divide assets.  Failing to obtain a QDRO may results in difficulties in accessing the funds. 
• Court Approval- The Court typically must approve the QDRO as part of the divorce proceedings.  This means that a judge has reviewed and endorsed the division of retirement assets, adding a layer of legal protection and accountability.  
• Peace of mind- A QDRO provides a peace of mind by ensuring that you receive your rightful share of retirement benefits according to the terms agreed upon during the divorce.