Understand the Basics of a QDRO
A Qualified Domestic Relations Order (QDRO) is a special type of court order that defines the rights and obligations of the participants in a retirement plan when it comes to splitting the plan’s assets in a divorce.
Before you can file a QDRO without an attorney, it is important to understand the basics of how QDROs work and the legal requirements involved. Here is a 2 step guide to help you get started.
Definition of QDRO
What exactly is a Qualified Domestic Relations Order (QDRO)? A QDRO is a court order that divides someone’s qualified retirement plan or IRA account between two people, usually in the event of divorce or separation.
A QDRO assigns certain amounts and percentages to each party’s retirement account. The purpose of this document is to divide benefits for legal spouses who receive payments from their former partner’s retirement plan.
When filing a QDRO, the rules can seem complex and can vary from state to state and plan to plan. It is important to note that not all types of plans qualify for QDROs; these include 401(k) plans, 403(b) plans, pension plans such as government or private sector defined benefit (DB) plans, and profit-sharing arrangements.
Generally speaking, qualified plans are subject to certain provisions under the Employee Retirement Income Security Act (ERISA).
Types of Retirement Accounts Covered by QDROs
Qualified Domestic Relations Orders (QDROs) are court orders that can provide users of retirement accounts with access to the funds in those accounts. The types of accounts covered by QDROs differ by state, but in general, Qualified Domestic Relations Orders can provide the worker spouse or an ex-spouse access to a qualifying retirement account such as:
-401(k) plans – these include traditional 401(k)s, SAFE Harbor 401(k)s and 401(k) Profit Sharing Plans.
-403(b)s – tax deferred annuities through a non-profit or educational organization
-SEP IRAs and SIMPLE IRAs – these can be employer or employee owned IRA’s.
-457 Plans – supplemental retirement investment plans for employees of state and local governments.
-Defined Benefit Pension Plans – pension plans that pay a predetermined monthly amount based on years of service and salary at retirement.
-Thrift Savings Plans (TSPs) – secure retirement savings vehicles available to Federal employees, uniformed services and other eligible organizations.
-Governmental 457(b) Deferred Compensation Plans – supplemental investment plans available to eligible employees of state and local governments.
Depending on the specifics of your agreement, QDROs can also provide access to IRA assets held in both Traditional IRA accounts and Roth IRA accounts.
What is the Purpose of a QDRO
A Qualified Domestic Relations Order (QDRO) is an important legal document that provides a means for the division of certain retirement or pension benefits between two or more spouses or other parties.
It allows you to avoid taxes and penalties associated with early withdrawals by transferring money from one plan to another without the plan owner having to pay income tax on the amount transferred. The QDRO is most commonly used when couples are divorcing and one party wishes to receive benefits from the other party’s retirement or pension plan.
The purpose of a QDRO is to ensure that these benefits are divided in accordance with the court’s ruling on issues such as alimony, child support, spousal support and more. The QDRO must be signed by both parties and certified by the court before it is filed with the retirement administrator who oversees the distributions.
Most employers require their own forms—not all forms are interchangeable—so it’s important to know which form they require before they will accept it. Before filing a QDRO with your employer, consult with an attorney who specializes in family law as they will typically have access to specific information needed when filling out such documents correctly.
This could help avoid costly delays caused by omissions or incorrect information found in previously submitted documents related to retirement funds.
Prepare the QDRO
Filing a Qualified Domestic Relations Order (QDRO) isn’t an easy task. It requires an understanding of the applicable laws, the right paperwork and patience. Many people opt to hire an attorney to help them with the process, but it’s possible to do it without going through the expense. Here’s a two-step guide for you to do just that.
Gather the Necessary Information
Before you begin, you will need to collect the necessary data and documents to complete the Qualified Domestic Relations Order (QDRO). Depending on your situation, this might include retirement plan documentation, states of residence for both spouses, Social Security numbers for all parties, and any prior court orders that were established with regards to the plan.
Additionally, you will want to make sure that the fundamental information about the retirement plan owner is known and accurate—identify all sources of retired income from the plan owner’s job or former job.
For employee pension plans, this generally includes employer name and address (if known), employee’s name and address, employment dates with both companies (if multiple employers are involved), type of benefit/funding arrangement (DC / DB/ Defined Contribution / Defined Benefit) date of birth or ID number is required by some employers when a QDRO is used in a transfer.
To determine which spousal benefits can be transferred through a QDRO in most cases ask four questions:
-What type of retirement plan is it?
-Does it qualify under ERISA?
-Is there a contractual provision allowing for an alternate payee?
-What other legal requirements must be met before submission?
You should also confirm if there are any sort of investment restrictions on the account or possible tax considerations for each party that should be kept in mind prior to filing. After all necessary information has been collected from the members impacted by the QDRO you can proceed to preparing and filing your Qualified Domestic Relations Order.
Draft the QDRO
The Qualified Domestic Relations Order (QDRO) is an order that divides retirement benefits between the spouse and former spouse of a married couple. It is essential to follow the correct procedures in preparation for filing for your QDRO. This two-step guide will provide you with the tips and instructions you need to properly draft a QDRO on your own.
Step 1: Collect Necessary Information
In order to effectively draft a QDRO, it is important to have all of the necessary information at hand. This includes personal information related to you, your former spouse, and any dependents as well as financial account numbers and other pertinent facts about each pension or plan being divided by the court order.
Step 2: Draft the QDRO
Once you have collected all of information necessary for drafting your QDRO, it’s time to begin creating the legal document itself. Take care to include accurate legal language that complies with state laws regarding division of assets in divorce proceedings. Be sure to clearly list out all details of the division process including beneficiary designations, dollar amounts being split, payment dates if delayed payouts assured, etcetera. Finally, thoroughly review your draft and edit as needed until you are confident that every detail has been carefully included so as not to introduce errors into later processing steps.
Submit the QDRO to the Plan Administrator
Once you have completed the first step of preparing the Qualified Domestic Relations Order (QDRO), it is time to submit the Order to the Plan Administrator. Here’s what you can expect during this process.
Most employers have specific guidelines and forms that must be used when filing a QDRO. You can typically find them on their website or by contacting their benefits department. All documentation must be provided in a timely manner and any additional information that is required must also be included.
The Plan Administrator will review your QDRO to ensure compliance with federal and state laws, as well as ensuring that all parties are properly identified and that any calculation of benefits is accurate.
The Plan Administrator will typically ask for additional documentation such as divorce decrees, marriage certificates, and/or death certificates depending on the nature of your request. It is important to follow up regularly with the Plan Administrator about your QDRO so that it can move through the process efficiently.
Depending on the complexity of your QDRO, you may receive a copy back from the administrator once they have reviewed it, or they may contact you for more information or clarification before approving or denying it.
The timeframe of this process can vary widely depending on the employer’s internal review protocols, but generally speaking it should take no longer than 90 days from initial submission until an approved QDRO returns to you in final form.
Follow Up with the Plan Administrator
Once you have drafted your QDRO, the next step is to fill out the plan administrator’s form. The plan administrator may require additional paperwork and information before they can approve the order, including:
-A completed plan administrator’s form
-A certified copy of your divorce decree or court order
-A notarized signature from both parties involved in the QDRO
It is important to review this additional material carefully before submitting it. Depending on the nature of your case, the court may want you to submit a copy of any other documents related to your case that are not already included in the submitted QDRO document.
If so, be sure to include those documents in your filing package. Once everything is complete and accurate, mail or fax all documents to the plan administrator for approval.
The waiting period for approval of a QDRO can vary greatly, depending on both state and federal regulations as well as plan requirements. As a best practice, contact the plan administrator after sending all paperwork to check on its status and ensure it is being processed correctly; doing so will help eliminate any misunderstandings or delays further down the line.
Additionally, make sure you keep copies of every document sent for your records; this will allow you quick access if any questions or issues arise later on regarding your QDRO filing.