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 Everyone General Overview The Divorce Decree (Judgment) The QDRO Why QDRO-law? How Much? How Long? What is a QDRO? A QDRO is needed when a court awards some or all of a spouse's benefits in a pension plan or retirement account to the other spouse in a divorce. A QDRO is a legal document that must be filed in the divorce proceeding, signed by a judge, and accepted by the pension plan administrator. Who is the pension plan administrator? In government employer pension plans and retirement accounts, the plan administrator is an agency of the government. In almost all private employer pension plans and retirement accounts, the plan administrator is the employer who sponsors the pension plan or retirement account. Sometimes, however, the plan administrator delegates responsibility to a third party. A QDRO does two important things. First, it obligates the plan administrator to pay some or all of a spouse's pension benefits or retirement account to the other spouse. Second, it shifts income tax responsibility from the spouse with the pension or retirement account to the spouse who receives the pension benefits or retirement account. Lawyers and judges commonly use the term "QDRO" as shorthand for the legal document that creates this direct payment obligation and tax shifting outcome. This practice is harmless if everyone understands that the applicable legal requirements for the "QDRO" vary depending on the type of pension plan or retirement account involved. Unless the context indicates otherwise, QDRO is used on this website as shorthand for a legal document that creates this direct payment obligation and tax shifting outcome. What are the applicable legal requirements for a QDRO? The applicable legal requirements for a QDRO vary depending on the type of pension plan or retirement account involved. They are found in statutes, administrative regulations, and court opinions. Who determines whether the QDRO satisfies the applicable legal requirements? The pension plan administrator. What determines the share of my pension benefit or retirement account my former spouse will receive? The language in the QDRO. Who decides what the language in the QDRO will be? The court that divorced you. How does the pension plan administrator determine my former spouse's share? By reading - and interpreting - the language in the QDRO. And that is why the language in the QDRO is so important. It doesn't matter what you, the court, or the divorce lawyers think the language means. What matters is what the plan administrator thinks it means. Poorly drafted QDROs give the plan administrator, who is not a party in the divorce proceeding, tremendous power. The plan administrator's interpretation of the language in the QDRO not only determines the share of the pension plan benefits or retirement account the former spouse will receive, but dozens of other important matters such as the method used to divide those benefits, when and how the former spouse will receive the benefits, and the former spouse's rights to survivor benefits. Because of the unusual role the plan administrator plays in the process. Most property transfers in divorce can be completed without the permission of a third party. Not so with QDROs. The role the plan administrator plays in the process, particularly the power to interpret the language used in the QDRO, can result in tension among and between the divorcing spouses, their attorneys, the court, and the plan administrator. This potential for tension explains why QDROs have become a specialized field of law. And why it is important to draft the QDRO with precision.
The divorce decree says I get "an equal share" of the pension plan. Isn't that good enough? It depends on the divorce decree, the pension plan administrator, and your individual facts. The pension plan administrator might determine that the divorce decree is not a QDRO because it fails to satisfy applicable legal requirements for any number of reasons. One reason might be that "an equal share" is simply too ambiguous to determine your share without additional detail. No direct payment of the pension benefits or retirement account to the former spouse will occur and no tax shifting to the former spouse on the benefits or account received will occur unless and until the pension plan administrator receives a new court document with adequate detail. The language in most divorce decrees is too imprecise to satisfy the various and complex applicable legal requirements for a QDRO. If the pension plan administrator accepts the divorce decree that says I get "an equal share" of the pension plan, isn't that good enough? Once again, it depends on the divorce decree, the plan administrator, and your individual facts. Don't forget. Every divorce decree can be a QDRO. Let's take the same decree as in the previous question, but consider the flip side. Let's say the plan administrator, rightly or wrongly, determines that the divorce decree is a QDRO. Let's say that the plan administrator then, rightly or wrongly, interprets the language "an equal share" to mean the former spouse is entitled to fifty percent of the pension benefit earned before, during, and after the marriage, rather than fifty percent of the pension benefit earned just during the marriage. That result may or may not be what the court, their divorce attorneys, or the parties intended. Many plan administrators do not disclose how they are interpreting your divorce decree when the QDRO is accepted, so the plan administrator's interpretation may not come to light until many years later, if ever. Are there additional problems a plan administrator's interpretation may cause? Yes. The share of the pension plan or retirement account is important. However, a plan administrator's interpretation of the divorce decree might also limit a former spouse's flexibility with a host of other issues that a properly drafted QDRO would address. Worse yet, the plan administrator's interpretation of a divorce decree involving a defined benefit pension plan might allow the pension plan to pocket some of the pension benefits and pay out less money than the plan would have paid out in the absence of the divorce. That helps no one, except perhaps, the employer who sponsors the pension plan. What should the divorce decree say to prevent these problems? It's easy. Every divorce decree should be crystal clear about whether or not the decree itself is intended to be the QDRO. If the divorce decree clearly states that the divorce decree is not the QDRO, and that a QDRO will be filed in court later, the plan administrator will have no choice but to wait for the QDRO to arrive. It is very common for a court to "reserve jurisdiction" to enter the QDRO after the divorce is over. The language in the QDRO will then control the division of the pension benefit or retirement account. The divorce decree gave me all rights to the pension plan. Is a QDRO necessary for that pension plan? No. A QDRO is only necessary when all or any portion of a pension benefit or retirement account will be transferred from one spouse to the other. Here, the court has determined that your former spouse loses all rights in the pension plan that you own. Pension plan benefits and retirement accounts are always "owned" by an individual spouse. For tax purposes, there is only one pension plan participant or retirement account holder. The divorce decree should clearly identify each pension plan or retirement account by name or account. Moreover, to avoid confusion, the divorce decree should always identify the individual "owner" of each pension plan.
Should the QDRO always be a separate legal document from the divorce decree? Yes, it should. A separate document that applies to a single pension plan or retirement account is the better approach. Plan administrators usually prefer for the QDRO to be a separate legal document so they do not have to carefully read your entire divorce decree to figure out the various portions of the decree that may apply to their pension plan. Plan administrators do not need to know, nor do they want to know, the details of your parenting plan, the child support payments, and who got the china and the fishing gear. QDRO-law always prepares a separate legal document for each pension plan that is being divided even when the QDRO and the divorce decree are being filed in court on the same day. Do all QDROs say the same thing? No. It's not that simple. Not all QDROs are alike because the applicable legal requirements for a QDRO vary depending on the type of pension plan or retirement account involved. Moreover, the same type of pension plan and retirement account often has a variety of different benefits, rights and features. The QDRO needs to be tailor fit to the pension plan that is being divided. Do all QDROs for the same pension plan say the same thing? No. It's not that simple. Not all QDROs for a given pension plan are alike because courts make different decisions about how benefits is a particular pension plan will be divided from one divorce case to another. Just as there is no cookie-cutter divorce decree, there is no cookie-cutter QDRO. Should the QDRO be prepared now or when the worker spouse is ready to retire? Now. Waiting for retirement is a big mistake. Disentangle yourself financially and emotionally from your former spouse as soon as possible. Unless and until a QDRO is in place, your rights to the pension benefits may be lost. And your flexibility to decide how the benefits will be paid out to you in the event your former spouse retires before the QDRO is entered may be impaired. I was divorced years ago but the QDRO was never prepared. Is it too late? It depends on the facts of your individual case. Long time delays between the divorce and entry of the QDRO can create complications. Sometimes it is simply too late to enter a QDRO. What papers do you need to prepare the QDRO? QDRO-law must have a complete copy of your entire divorce decree that was signed by the judge. We also need to have current names, addresses, dates of birth, and social security numbers of the two spouses. If you have statements or other information from the pension plan about its QDRO procedures, that is often useful. But we will talk that over when you contact us.
Why should QDRO-law prepare the QDRO rather than my divorce lawyer? QDROs are all we do, which means we can usually prepare a QDRO more quickly, efficiently, and for less cost than most divorce lawyers. QDRO-law usually knows the applicable legal requirements for a QDRO in the pension plan or retirement account without having to do costly legal research. QDRO-law determines and understands the benefits, rights and features of a particular pension plan or retirement account and drafts the QDRO accordingly. This is a complex area of the law. Many divorce lawyers feel that they lack the expertise needed to prepare a good quality QDRO. QDROs are often the last thing that needs to be done in a divorce case. For many divorce lawyers, there are other, more pressing, files to deal with. What is QDRO-law's role when it prepares a QDRO after the divorce is final? Writing the QDRO with clear, detailed, technical precision is our overall goal. QDROs drafted by QDRO-law are intended to implement the pension division outlined in the decree, to minimize plan administrator discretion, satisfy applicable legal requirements, maximize the potential benefit payable from the pension plan, and keep the options of the former spouse open about when to receive and how to receive the pension benefit or retirement account distribution. What is the pension plan administrator's role in the QDRO process? The plan administrator's role is to protect the interest of the pension plan. Often, that means protecting the interest of the employer who sponsors the pension plan. The plan administrator is not your enemy. But the pension plan administrator is not your friend, either. Even though plan administrators have a statutory obligation to process QDROs, some pension plan administrators view QDROs as a complete administrative nuisance. The plan administrator's role is to follow the court's instructions in the QDRO. A good quality QDRO, with clear and precise instructions, makes the plan administrator's job easier. The pension plan administrator has a model QDRO. Why not use that? Some pension plans have a "model" QDRO. But make no mistake, model orders are drafted for the convenience of the plan administrator. Many model orders contain provisions that are inappropriate in any QDRO. Most model orders provide less flexibility and fewer options that the law permits a QDRO to offer. Very few maximize the payment of pre-retirement survivor annuities, for example. They often require the divorcing parties to make decisions about complex matters that neither they nor their divorce attorneys understand. Some plan administrators bully or entice divorce lawyers into using model orders. But no private employer plan administrator can require a court to use its model order.
How much does a QDRO cost? It depends on the case. As a general rule, QDRO-law charges $550 per pension plan that needs to be divided. But see the fees section of this website for more information about fees. Also look at the services section of this website to look at the comprehensive services QDRO-law provides for its fee. How long does it take to prepare a QDRO, file it with the court, and obtain plan administrator acceptance? The length of time needed to complete these tasks varies substantially from case to case. Take a look at the services section of this website to determine why that is so. There are many steps involved in the process. QDRO-law does much more than simply draft a QDRO and hand it over to your divorce attorney. Very few cases are completed in less than two months. Very few cases take more than six months to complete. Most cases are completed two to six months after QDRO-law opens its file. How long does it take for me to receive my benefits after the QDRO has been accepted by the plan administrator? It depends on your individual facts. Not all pension plans and retirement accounts allow you to receive your share right away. You may have to wait many years. After the QDRO has been accepted, you will have to complete additional administrative forms the plan administrator sends you when you want to receive your share of the benefits or retirement account. The QDRO drafted by QDRO-law will give you the ability to receive the funds as soon as the law allows.
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