QDRO Terminology

The Important Terms Used in a QDRO 

• Account Balance– The total amount of funds or assets held in a retirement account, often relevant for division in QDROs involving defined contribution plans.
• Accrued Benefit– The benefit the participant has earned under the plan.
• Actuarially Equivalent– Having the same value as of a given date (while typically not using the actual asset for division) using the same assumptions available under the plan in question.
• Alternate Payee– The individual who is receiving a portion of the retirement plan benefits as outlined in the QDRO, typically a former spouse.
• Annuity– A form of benefit in which payments are made at regular intervals for a specified period of time.
• Beneficiary– The person named to receive benefits upon the death of a participant or alternate payee.
• Cost of Living Adjustment (COLA)– Under most Defined Benefit Plans, the Plan will provide an increase in the monthly benefit amount (typically on an annual basis) to adjust for inflation. Under law in Missouri or Kansas, typically a former spouse is entitled to the pro rata share of the cost of living adjustments received by the employee/beneficiary spouse, unless they are waived or not included in the court order for division.
• Community Property– A property ownership regime where most assets acquired during the marriage are considered jointly owned by both spouses and subject to equal division. 
  Contingent Alternate Payee– An Alternate payee whose benefit is contingent upon the death of another alternate payee or some other event.
• Date of Dissolution– This is the date that the dissolution becomes final.
• Date of Division of Account– For Defined Contribution Plans Only. For purposes of a QDRO this is usually the date of separation unless another agreement has been reached between the parties. Normally, the Former Spouse would then be entitled to participate in gains and losses on the amount determined at Date of Division until actual distribution to the Former Spouse.
• Date of Hire– This is the date that the Participant began working for the employer. This date may be before date of marriage of the parties.
• Date of Separation– This is the date that is used in the dissolution as the legal date of separation.
• Defined Benefit Plan– A retirement plan that provides a specific, predetermined benefit based on factors like salary and years of service.
• Defined Contribution Plan– A retirement plan in which the contributions are defined and the benefits depend on the contributions made and their investment performance.
• Domestic Relations Order– Any judgment, decree, or order (including approval of a property settlement agreement) that (1) provides child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (2) is made pursuant to a state domestic relations law.
• Earliest Retirement Age– For purposes of processing/preparing QDRO’s, the earliest retirement age is typically the earlier of: (1) when the participant is entitled to payment of benefits under the plan; or (2) the later of (a) the date the participant reaches a required age under the plan; or (b) the earliest date the participant could begin to receive benefits if she or he no longer works for the company.
• Early Retirement Subsidies – Employers offer Early Retirement Subsidies or other Retirement Enhancements. Under California law the Former Spouse is entitled to these Enhancements unless they are specifically waived by the Former Spouse.
• ERISA– Employee Retirement Income Security Act- a federal law that governs employee benefit plans, including retirement plans, and sets rules for QDROs.
• Fixed Dollar Amount– You may have an agreement between the Participant and the Former Spouse as to a fixed dollar amount of the benefit that should go to the Former Spouse.
• Fixed Percentage– You may have an agreement between the Participant the Former Spouse as to a fixed percentage of the benefit that should go to the Former Spouse.
• Guaranteed Benefits– The amount of pension benefits insured by the Pension Benefit Guarantee Corporation (PBGC)
• Government Employer– This would apply to any governmental employer with the exception of the Military.
• Gross Annuity– Under the Federal Plans this is the amount of monthly annuity payable after reducing the self-only annuity to provide survivor annuity benefits but before any other deductions. It also includes lump sum payments, if any, made to the retiree under section 8343a or 8420a of Title 5, United States Code, unless the court provides otherwise.
• Joinder– During the dissolution proceedings it is possible that the retirement plan was “joined” as a party in the dissolution. This is done to provide the retirement plan with notice that there is a potential claim against the retirement funds by the Alternate Payee. If the Plan was joined there will be a filing with the court that is date stamped by the Court.
• Joint and Survivor Annuity– An annuity that pays benefits over the recipient’s lifetime and over the lifetime of the person named as beneficiary.
• Life Expectancy– The number of years a person is expected to live, on average, after a given age.
• Lump Sum– A form of benefit payment in which the entire benefit is paid at one time.
• Method of Division– There are two approaches for determining the allocation of funds. One option is to use a specified percentage of the account, while the other is the exact dollar amount. When dividing an account, a percentage of the account can be used or an actual dollar amount can be calculated or negotiated. When a percentage is used, normally, the Time Rule is used to determine the fair percentage of division to be awarded to the former spouse. The Time Rule is calculated by determining the number of months during the marriage the participant was in the plan, through the date of division, divided by the total number of months the participant participated in the plan through the date of division. This gives a fraction which is fair determination of the marital portion for division.
• Military Employer– This would apply to any Non-Civilian Military Personnel. Civilian Military Personnel are considered Non-Military Government Employees.
• Net Annuity- This is a term used with Federal Plans to determine the amount of monthly annuity received by the employee that is payable after deducting from the gross annuity: (1) any amounts owed by the government employee to the United States; (2) deductions for health insurance premiums; (3) deductions for life insurance premiums; (4) deductions for Medicare premiums; (5) property withheld for Federal Income tax purposes; (6) property withheld for state income tax purposes. The Net Annuity amount also includes lump sum payments made to the retiree unless the court order provides otherwise.
• Normal Retirement Age– The age at which a participant can retire under the plan and receive a full pension benefit. In most cases, the normal retirement age will not be greater than 65 years of age.
• Participant- The individual who holds the retirement plan account is subject to the division of assets as per the QDRO.
• Petitioner– The Petitioner is the party that initiated the dissolution proceedings.
• Plan Administrator– The entity responsible for managing the retirement plan, including processing benefit distributions.
• Plan Document– The legal document that governs the terms and conditions of the retirement plan, including eligibility benefits, and distribution rules.
• Plan Sponsor– The employer or organization that sponsors the retirement plan, which is often a party to the QDRO process.
• Private Employer– This would be any employer that is not a government entity. This would also apply to those that are self-employed.
• Private Employer– A method used to divide retirement benefits proportionally between the participant and the alternate payee, often based on the time of marriage and contributions.
• Qualified Domestic Relations Order (QDRO)– A QDRO is a domestic relations order that gives an alternate payee the right to receive all or a portion of the benefits payable to a participant under the plan, and meets certain other legal requirements with respect to the information and benefits involved.
• Qualified Joint and Survivor Annuity (QJSA)– A Qualified Joint and Survivor Annuity, (QJSA) is a joint and survivor annuity where (1) the participant receives a definite amount of money at regular intervals for life, and (2) after the participant dies, the surviving spouse receives a definite amount of money (not less than 50% or more than 100% of the participant’s amount) at regular intervals for life. The Former Spouse may be designated as the Surviving Spouse and therefore the beneficiary of the Surviving Spouse Annuity. When a QJSA is elected by the Participant the monthly retirement benefit will be lower to pay for the Surviving Spouse’s benefit, since the Plan will have to pay money over the lifetime of both the Participant and the Surviving Spouse. This benefit can be paid for by the Participant, Former Spouse or both.
• Qualified Plan Administrator– The entity responsible for administering the retirement plan and processing QDROs.
• Qualified Preretirement Survivor Annuity (QPSA)– A QPSA is a benefit that is paid to the named beneficiary in the event that the Participant dies before retirement benefits have commenced. If this option is not selected the Former Spouse may forfeit all retirement benefits if the Participant dies before the Former Spouse commences benefits.
• Retirement Enhancements– Employers offer Early Retirement Subsidies or other Retirement Enhancements. Under California law the Former Spouse is entitled to these Enhancements unless they are specifically waived by the Former Spouse.
• Self-only Annuity– Under the Federal Plans, this is the amount of monthly recurring payment to a retiree who has elected not to provide a survivor annuity to anyone. Unless the court order provides otherwise, it also includes lump sum payments, if any, made the retiree under Section 8343a or 8420a of Title 5, United States Code.
• Separate Property– Assets and property owned by one spouse before the marriage or acquired individually during the marriage, which may not be subject to division in a divorce.
• Single Life Annuity– An annuity that pays benefits over the Participant’s lifetime – also known as a straight-life annuity. Once the Participant dies, there are no further annuity payments.
• Spouse– Husband or wife as determined under applicable state law. A QDRO can provide that the participant’s former spouse be treated as the participant’s spouse.
• Spousal Consent– A spouse’s agreement to allow the participant to waive the QPSA or elect a form of benefit other than QJSA.
• Survivor Benefit– The benefit a survivor receives after the participant dies.
• Temporary Life Annuity– An annuity that pays benefits over the shorter of the recipient’s life or a specified period.
• Time Rule- This is a formula used to calculate and determine the share of benefits in both a defined contribution and defined benefit plan. The Time Rule is calculated with the number of months during the marriage that the participant was in the plan through the determination date, divided by the total number of months participant was in the plan through the determination date. This fraction/percentage gives you a percent of the plan that was earned during the marriage and the alternate payee’s share is then typically one-half/fifty percent of the total value earned during the marriage. Depending on the state, the law, the settlement agreement and other considerations, the determination date can be the parties’ date of separation, date of dissolution/divorce, date of retirement, the agreed upon date of division or some other date agreed to by the parties.
• Valuation Date– The date used to determine the value of retirement plan assets for the proposed of division in the QDRO.”
• Value– The actuarially estimated amount needed at a point in time to provide monthly benefits in the future. Value depends on the amount of the monthly benefit payment, when the benefit payments start and stop, age(s) of the recipient(s), mortality assumptions, and interest assumptions. Also referred to as “present value” or “actuarial present value.”
• Vesting– The point at which a participant becomes entitled to receive retirement plan benefits. Vesting rules can vary by plan.
• Vesting Schedule– A plan-specific schedule that indicates when a participant becomes fully vested in their retirement benefits.