Qualified Domestic Relations Order (QDRO)

Retirement accounts, including but not limited to

  • 401ks
  • IRAs
  • pension plans

These are usually some of the most important assets to divide between divorcing spouses. Parties typically agree on how this account divides between them. However, the parties and their attorneys need to be more specific. They need to do more than designate the divorce decree or settlement agreement to divide the accounts. The retirement plan can be subject to the Employee Retirement Security Act (ERISA). If this is the case, the parties will need to draft a Qualified Domestic Relations Order (QDRO). The Court and the retirement plan’s administrator both then accept or reject the QDRO. A party who does not draft a proper QDRO can find themselves forfeiting a portion, or the entire amount, of the retirement account, that the party received in the divorce decree.

What is a QDRO?

A retirement account subject to ERISA requires a special order to divide the retirement account to award a portion of the account to an individual other than the plan participant. The alternate payee refers to the individual receiving a portion of their spouse’s account. A proper QDRO consists of an order approved by the Court and the plan administrator. They certify that the division of the retirement account complies with both federal law and the plan administrator’s specific requirements. Once approved, the plan administrator can divide the retirement account. They then award a portion of the account to the alternate payee.

Do I need a QDRO?

Only retirement accounts subject to ERISA require a QDRO. An IRA usually does not require a QDRO. This is because the account owner is the person in control of the account and considered the plan administrator (I.R.C. § 408). However, each retirement plan is different. It is best to check with the plan administrator to see what documents they require to divide the account.

Important QDRO Considerations

It is important that you consult with your Salt Lake City divorce lawyer when contemplating the division of any retirement account. Usually, the attorney for the alternate payee is the party responsible for drafting the QDRO. There are, however, many attorneys who do not draft QDROs. It is important that you talk with your attorney to know if they plan on drafting the QDRO or if you will need separate counsel.

Many retirement account plan administrators have sample QDRO forms that an attorney or party can fill out. However, it is important to remember that the plan administrator designed these forms for their ease. They are not designed necessarily for the benefit of the alternate payee. It is important that the alternate payee’s attorney carefully drafts a QDRO that is in the best interests of his or her client and not for the ease of the plan administrator.

It is vital that a party drafts a QDRO immediately. A person who unnecessarily delays drafting and finalizing the QDRO may inadvertently waive their interest in the retirement plan. If you were awarded a portion of a retirement account in a divorce and do not know if the account was properly divided by a QDRO, please consult with us immediately to see what options are available.

Sarah ChristensenQualified Domestic Relations Order (QDRO)