In a divorce, one of the many assets subject to division between Husband and Wife is a retirement account such as a pension, 401(k) or an IRA. If one spouse must share a portion of his or her retirement with the soon to be ex, a Qualified Domestic Relations Order, or QDRO is usually required.
A QDRO is a legal document that directs the administrator of a pension plan to give a certain amount of an employee’s pension to the non-employee, ex-spouse after the divorce is final. A QDRO is required by most retirement plans even though the final judgment or divorce decree provides for such payment.
Many problems and questions can arise when addressing the split of retirement assets.
- A pension may be a non-qualified plan that can’t be divided.
- The value of the retirement asset may drop between the time of your divorce or settlement agreement and the time you are having the QDRO prepared.
- The official division date may not have been established, and therefore could work against your interests.
- Vague language in your final judgment or marital settlement agreement can create questions regarding supplements, temporary benefits, and cost-of-living adjustments on both parties’ pensions.
It is due to questions like these that we strongly advocate for our clients to retain us as the QDRO drafter and caution against jointly retained QDRO drafters. A QDRO should advocate for your best interests, as there is no such thing as a neutral QDRO.
Timing is critical. At Murphy & Berglund, PLLC, we understand how important it is to obtain all necessary information on retirement plans as early as possible. It is best to have a QDRO entered simultaneously with the divorce decree or judgment. This is not always practical because certain plan administrators can take months to approve a QDRO. Some people will try using the employer-provided sample QDRO to move the process along at a more rapid pace. Often times, the sample provided doesn’t address pre-retirement and post-retirement survivor benefits if one spouse were to pre-decease the other. It is also very common for the sample plans to omit standard language to address employer-provided early-retirement supplements. Every plan administrator will look for different key words. Some require you to use the word “supplement” instead of “subsidy” and will reject your QDRO if a key word is missing. To expedite the approval of your QDRO, we seek pre-approval from the plan administrator. This will ensure the QDRO is accepted after it is signed by the Judge.
Whether you are seeking a divorce, or have already been granted a divorce, you can contact us to schedule a consultation today to answer your QDRO related questions.