Pension plan and retirement benefits accumulated by a spouse during the course of a marriage are considered marital assets that would be shared between the spouses upon a divorce. However, most pension plan and retirement benefits are personal to the individual who earned the benefit and cannot be transferred to another party or liquidated without incurring substantial penalties and interest. An exception exists, which allows for the transfer of such benefits to a spouse upon a divorce without penalty or taxes, so long as the distribution is made in an appropriate fashion pursuant to a court order that meets specific requirements. This order is referred to as a Qualified Domestic Relations Order (or for certain benefits, simply a Domestic Relations Order). In addition, a Qualified Domestic Relations Order, when served on the pension or retirement Plan Administrator, requires the Plan Administrator to make payments from the plan directly to each spouse, in accordance with the provisions of the Order.
A Qualified Domestic Relations Order or QDRO (pronounced "Quad-Row") is a potentially complex, detailed and technical document that must meet the approval of not only the parties and their attorneys, but also the Court and the Plan Administrator of the pension or retirement plan. Preparing a QDRO is often an involved, detailed and potentially time-consuming task and the accuracy of the QDRO can have a significant impact on the payment and transfer of pension and retirement benefits between divorcing spouses.
If required, a Qualified Domestic Relations Order is prepared to implement the terms of a divorce decree. As such, the preparation of a QDRO is rarely included in an attorney's engagement on behalf of a client for a divorce matter, but requires a separate and additional engagement following the completion of the divorce.
To discuss any issues or questions with respect to Qualified Domestic Relations Orders, please contact Lawrence J. Schwind.