Qualified Domestic Relations Orders (QDROs)
Pension 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, pension and retirement benefits are typically personal to the individual who earned the benefit and cannot be transferred to another party or liquidated without incurring taxes and substantial penalties. An exception exists, which allows for the transfer of many of these 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 QDRO (pronounced “quad-row”).
In addition, a Qualified Domestic Relations Order (or, for certain benefits, simply a Domestic Relations Order), when served on the pension or retirement plan administrator, requires the plan administrator to transfer assets or make payments from the plan or account directly to the other spouse, in accordance with the provisions of the order.
Although the court will determine at the time of the divorce how the retirement benefits are to be shared, the QDRO is a separate order, obtained after the divorce has been granted, for the specific purpose of requiring the administrator of the retirement benefits to divide the benefits according with the terms of the divorce. A QDRO 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 or it will not be honored.
It is important to obtain a valid QDRO after a divorce is complete to secure the receipt of your interest in your divorced spouse’s retirement benefits. In the absence of a QDRO, your payments will be sent directly to your former spouse upon retirement or other distribution. The accuracy of a QDRO can have a significant impact on the payment and transfer of pension and retirement benefits between divorcing spouses.
Our attorneys will work with you, your spouse and his or her attorney, as well as the plan administrator and the court, not only in the preparation of an appropriate QDRO, but in securing the necessary approvals and signatures required to implement the QDRO and secure your interests effectively.