Obtaining a QDRO (Qualified Domestic Relations Order)

Even within a single jurisdiction, there is no set procedure for obtaining a QDRO.

The terms and conditions of the QDRO must be set forth in the martial settlement or divorce decree. At a minimum, the decree should set forth the amount or percentage of the benefit to be assigned from the worker-participant, identity the plan(s) from which the benefits are to be assigned; and also other material facts, such as whether the alternate payee is to be named as surviving spouse for purposes of a joint and survivors annuity; when the benefits are to be divided; and whether any postretirement subsidies are to be included.

A note of common sense caution here. Obtaining an approved QDRO, one that is in place and approved by the plan administrator, can take anywhere from a month to as long as a year or more. The worker-participant has no incentive to expedite the preparation of a QDRO, and the alternate payee receives his or her share (usually her) only if and when the QDRO is prepared. Hence, it is in the interest of the alternate payee to move forward with the QDRO. Nevertheless, cooperation between the former spouses -- the participant and the alternate payee -- is highly desirable because the cost of litigation dramatically increases the expenses associated with QDRO preparation.

For this reason, the alternate payee’s practitioner should move as soon as possible after the divorce to obtain a QDRO (although it is very common to wait before doing so).

Rarely is a single QDRO may be used for two or more retirement plans -- for example a 401(k) and a defined benefit plan -- when they are both defined in a Domestic Relations Order (DRO) that qualifies as a QDRO; however, one QDRO should not be used to cover two or more different employers.

Sometimes, a plan administrator provides a model form that can be used because it reduces the time to review the form for approval. Such forms must be used with care, however; the forms may not deal properly with the terms and conditions to which the participant and the worker have agreed.

The practitioner who prepares the QDRO must determine if the plan administrator preapproves QDROs. Preapproval means that the substance of the QDRO complies with the rules and regulations covering QDROs and the pension plan. QDRO approval is very important. A veto by the plan administrator can stop the process, and the alternate payee has no recourse but to start all over.

The plan administrator is not responsible for the accuracy of the distribution of pension benefits. It is quite possible that the plan administrator could approve a QDRO that incorrectly distributes pension benefits because of an mathematical error made by the practitioner of one or the other spouses.

In obtaining a QDRO, God and the devil are in the details. A QDRO reflects what the spouses -- the worker-participant and the alternate payee, usually the husband and wife -- agree to the division and distribution of pension benefits. The QDRO, normally written after the divorce is final, is based on the language of the marital settlement agreement. For this reason it is a good idea that the practitioner who will write the QDROs -- often the attorney of the alternate payee -- to make certain the agreement does what the parties wish it to do relative the pension and its distribution. Despite this, it is not uncommon for the separation agreement to be unclear about the name of the retirement plan, the method used in allocating benefits, and even the date used in valuing the account balance. Such ambiguities invite difficulties in the preparation of a QDRO.

Authored By: Theodore K. Long, Jr., President, Pension Appraisers Online, Inc.

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