29 Dec Retirement and Divorce: How QDRO Comes Into Play
If you are going through a divorce, a few aspects that will need to get settled come to mind right away. Custody, child support, and the division of assets such as homes, money, and other property are likely the first things you will think of. Retirement split is not automatic. How retirement accounts get split might not be anyone’s first thought, but it is an asset that is considered in a divorce. More than 62 million private wage and salary workers are currently covered by employer-provided retirement plans in the United States[1]. The division of marital property generally is governed by state domestic relations law, but any assignments of retirement interests must also comply with Federal law.
What is a QDRO?
A qualified domestic relations order, or a QDRO, is a domestic relations order that creates or recognizes the existence of an “alternate payee’s” right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan that includes certain information and meets certain other requirements. The other requirements are:
- The order must not require a plan to provide an alternate payee or participant with any type or form of benefit, or any option, not otherwise provided under the plan;
- The order must not require a plan to provide for increased benefits (determined on the basis of actuarial value);
- The order must not require a plan to pay benefits to an alternate payee that are required to be paid to another alternate payee under another order previously determined to be a QDRO; and
- Pursuant to ERISA, the order must not require a plan to pay benefits to an alternate payee in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her subsequent spouse.[2]
How Does a QDRO Affect Me?
First, QDROs only apply to certain types of retirement plans. Therefore, you will need to determine the type of retirement accounts that you share with your spouse and which account type will be divided, and of those accounts which are required to be divided by a QDRO or subject to ERISA requirements. Having a QDRO in place can affect you differently depending on which spouse’s retirement plan it refers to. If it is your retirement plan, a portion is now getting paid to your ex-spouse. If the order applies to your ex, then you are the spouse who is receiving part of the retirement funds.
Are QRDOs Automatic?
No, QRDOs are not an automatic part of a divorce settlement. Usually, the beneficiary spouse is the person who needs to initiate its draft.
Is an Attorney Needed?
Whether you are the beneficiary spouse or the spouse whose retirement plan is being split, having an experienced divorce attorney can be extremely helpful. The process for drafting and filing a QDRO is straightforward, but having an attorney will ensure that all proper steps are taken. In addition, they can help you through a process that can be stressful and emotional. If you are going through a divorce and are worried about protecting your assets or making sure you are a beneficiary to them, consider a family law attorney at Navarrette | Bowen, P.C. We have a team of experienced divorce lawyers that can help you through any family law matter, including QDROs. Our main office is located in downtown Denton. Contact us today to set up a confidential consultation to discuss your circumstances and receive guidance.
[1] https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/qdros.pdf
[2] ERISA §§ 206(d)(3)(D)(i)-(iii), 206(d)(3)(E)(i)(III); IRC §§ 414(p)(3)(A)-(C), 414(p)(4)(A)(iii)