The Complete QDRO Handbook by Carrad
Once the plan has approved the DRO as qualified, be sure to obtain written confirmation of this fact with identification of the exact document. A copy of this qualification decision should then be forwarded to the Alternate Payee for their permanent records.
Review Old QDROs:
Consider reviewing old QDROs every three to five years, since plans can terminate, parties remarry or die, or other circumstances change. A form letter will suffice to send to the client enquiring if they would like you to review the status of the QDRO.
QDROs for Child Support:
While the use of a QDRO is more time-consuming than other child-support enforcement techniques, once in place, they are permanent and cannot be defeated by anything done by the parent. A QDRO is especially useful when the participant is already retired and receiving payments or is unemployed but has benefits from a previous employer. Additionally, if the parent is evasive in his obligation by quitting a job, the QDRO can be one method to assure payment when other remedies have failed.
A DRO may be drafted to include amounts in arrears for child support. If in place prior to his death, the IV-D Agency will be able to collect amounts owed. Otherwise, no claim against the benefits will be honored.
The IV-D Agency prefers the Shared Interest Approach in order to begin payments immediately rather than upon the retirement of the Participant. If the Participant is already receiving payments, either Shared Interest or Shared Benefit can produce the same result. However, the Shared Interest Approach will require determining the Participant’s current accrued benefit.
The child support QDRO must state the child’s date of birth and the date or event that ends the payments.
The participant is always taxed on payments made to the child under a QDRO.
Streamlining the QDRO Process:
1) Educate your clients to give them a sense of control over the process of receiving their Plan benefits. Send them copies of all correspondence from or to the Plan. You may wish to use a rubber stamp stating “no action necessary” if the document is simply for their information.
2) Draft the DRO early in the divorce process, leaving blanks for percentages or dollar amounts.
3) Get an informal approval from the Plan Administrator of your draft in order to speed the finalized DRO through their office.This will give you plenty of time to make any needed adjustments before the court hearing.
4) Get the DRO approved as to form by the opposing attorney. If you are far apart on issues within the DRO, this sharing will provide an opportunity to pinpoint the issues. You can bring the DRO to court with the blanks and explanation that it has been approved by the Plan.
5) Do not charge a flat fee for QDRO cases. This can create a situation where shortcuts can hamper the proper drafting and review.
6) Outsourcing QDRO drafting to a consultant who specializes in this job is one way to avoid dealing with the Plan Administrator and ERISA requirements.
7) Set up a system in your office whereby every DRO receives follow-up until approved by the Plan Administrator as a QDRO.Revising is the norm here.
This paper is intended to be a practical guide for dealing with QDROs. While not comprehensive, as an executive summary, it should provide valuable guidance in a very complicated and structured area of divorce.