If you and your spouse are considering, or are in the process of divorce, and one or both of you has a corporate benefits or civil service, 401(k) savings and/or pension plan, part of the division of marital assets will likely involve the drafting of a QDRO, or Qualified Domestic Relations Order.
QDROs are documents mandated by federal law under ERISA (Employee Retirement Income Security Act) which gives guidance on protecting the “alternate payee,” which is youif you are the non-employee spouse.
QDROs are typically the last item to be developed in the divorce process once the divorcing couple have completed a mediated settlement agreement. These documents can be tricky to draft and should be carefully developed and reviewed by you, your divorce attorney and your Divorce Financial Planner for accuracy and consistency before signing and submitting to the respective employing organization.
Often, someone in your attorney’s office may work on drafting your QDRO, or it could be outsourced to a specialty firm by your attorney. Each QDRO must meet the exact requirements of the account owner’s employer, be it corporate or civil service. Make sure wording in the QDRO is consistent with any specifics written in your mediated settlement agreement, and/or divorce decree documents, with regard to the division of financial assets in the above described plans.
ERISA requires that a plan provide to the divorcing couple and their attorneys, four documents useful in reviewing a QDRO. They are:
• The text of the plan
• Summary Plan Description
• The Plan’s Written QDRO Procedures
• Annual benefit statement
Divorcing couples should focus on the Summary Plan Descriptionwhich provides the most important features of the plan document in easier-to-understand language. It contains a comprehensive description of the rights and duties of beneficiaries and participants. Be sure to read the section outlining “rules for QDROs, divorce and survivorship.”
The written QDRO procedures document for the employer’s plan is also very important for guidance on the proper drafting of the document. In addition, the employer should provide a sample QDRO to follow. To secure a copy of the QDRO procedures, a phone call request to the employer’s Plan Administrator, typically in the Human Resources department, should suffice. My advice would be to get copies of these documents early in the divorce process. The Plan Procedures will include a complete checklist of plan requirements for approving a QDRO, and the steps necessary for expedience.
This blog is intended to be a general guide or overview of QDROs. While not comprehensive, it provides valuable guidance in an often complicated and structured area of divorce.