After a Divorce Ruling, What Is a QDRO?

By Kay Lee

A qualified domestic relations order, also known as a QDRO, is a legal document that allows an individual to give another person the right to receive all or part of his retirement benefits. A QDRO is typically the result of the division of marital property after a divorce, since the majority of retirement benefits may have been earned during the marital period and the court may decide that a spouse is entitled to part of those benefits.

QDROs

A QDRO is a judgment, decree or court order that relates to child support, alimony or a divorce settlement under state domestic relations law. Under federal law, QDROs can provide benefits to a spouse, former spouse, child or other dependent of the retirement plan participant. The person receiving a benefit from a QDRO is called an alternate payee. Without a QDRO that is accepted by the retirement plan, the alternate payee will not be able to receive any part of the retirement benefits.

QDRO Requirements

By law, QDROs must contain the name and address for the alternate payee, the exact name of the retirement plan that will be paying the benefits, the amount (either a dollar figure or percentage of benefits) that should be paid to the alternate payee, and the number of payments or time period covered by the QDRO. QDROs are not allowed to give the alternate payee any benefits that are not available to the participant in the plan. For example, if the participant has not yet reached the retirement age required to receive a benefit under the plan, the alternate payee will not be able to receive a benefit before the participant reaches retirement age.

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Obtaining QDRO

To obtain a QDRO, first you will need a judgment, decree or court order stating that you are entitled to all or a portion of your former spouse's retirement benefits. Once you have the court mandate, you may contact the retirement plan for further instructions since many plans have model QDROs to use or specific rules that must be followed. In addition, there are companies devoted to drafting QDROs on your behalf or you may have your divorce attorney draft your QDRO for you. Once drafted, you may submit the QDRO to the retirement plan for approval. Once the QDRO meets the retirement plan’s standards and has been approved, you may then file the document with the court. Benefits will begin to be paid in accordance with the terms of the QDRO.

Tax Implications

The alternate payee will treat the distributions received through the QDRO as if it were her own retirement benefits. This means that the retirement benefits are likely to be treated as income and must be reported on the alternate payee’s income taxes. There are, however, exceptions to this rule. If the alternate payee receives money through a QDRO from a Roth 401(k) plan, the benefits would not be taxable since they were originally contributed to the plan on an after-tax basis. Also, if the QDRO assigns a benefit to a dependent of the plan participant, the plan participant would be responsible for paying taxes on the benefit.

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Is QDRO Necessary in the Dissolution of a Marriage?

References

Related articles

Can an Ex-Wife Get Retirement Pay From the Husband if He Retired After the Divorce?

Courts divide marital property -- including retirement benefits -- when a couple divorces. Even if a spouse has not yet retired, the divorce court can divide both the assets in his retirement account and pension benefits he owns at the time of the divorce. However, courts do not typically reopen a divorce case once one spouse retires to give a portion of his retirement to the other spouse.

Non-Vested Pension Division During a Divorce

When you divorce, the court will issue a divorce decree that, among other things, divides the property you and your spouse accumulated during your marriage. Like real estate, bank accounts and personal property, pensions are considered property that can be divided by the court. Non-vested pensions can be more complicated to divide because the benefits have not yet been fully earned.

Can I Postpone an Absolute Divorce Until the QDROs Are Signed by a Judge?

A qualified domestic relations order, often called a QDRO, is a special document that divides up retirement accounts as part of a divorce. A QDRO allows one spouse to receive a portion of the other's retirement account without taxes or penalties. QDROs are drafted after a divorce instead of during a divorce. Therefore, it is not possible to postpone a divorce until the QDRO has been signed by the judge. In fact, postponing a divorce would have the opposite effect and would instead postpone the drafting and implementation of the QDRO.

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