If a couple has been ordered by the Court to break up their retirement accounts, or if the parties have agreed to a settlement breaking up a portion of their retirement accounts, then typically someone will need to draft what is called a Qualified Domestic Relations Order (“QDRO”).

QDRO: A “qualified domestic relations order” (QDRO) is a domestic relations order that creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and that includes certain information and meets certain other requirements.

Reference: ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)

See http://www.dol.gov/ebsa/faqs/faq_qdro.html

While not all retirement plans require a QDRO, typically pensions and 401Ks do require QDROs. Parties would be advised to have an attorney draft a QDRO since they encompass complicated areas of retirement law. Whether a client needs to have a QDRO drafted or have one reviewed, the Miller Law Firm, P.A. is available to help.

When entering into a property settlement it is very important to consider whether a QDRO may be needed.  Factors to consider regarding QDRO’s include:

  • Will the amount distributed be an exact dollar amount or a percentage?
  • Will there be more than one payment made?
  • Who will pay for the fees associated with drafting the QDRO?
  • Will the parties share the administration fees associated with the QDRO?
  • What is the name of the Plan to be divided and who is the Plan’s Administrator?
  • Do you have all the vital information from your ex-spouse to finalize the QDRO? (Address and social security number are usually required)

QDRO’s must be approved not only by the Court but the Plan Administrator before they will go into effect. Parties planning on taking a distribution from the funds obtained in a QDRO are strongly encouraged to seek accounting advice in order to avoid any potential tax consequences. Call the Miller Law Firm, P.A. today at (864) 527-0413.