QDROs in California
How does a QDRO work?
Can courts divide retirement plans?
Types of retirement plans QDROs cover
How to file
How long does it take to get funds?
A California court issues a qualified domestic relations order (QDRO). This document contains instructions about how parties split a retirement plan during a divorce.
A QDRO requires a plan administrator to pay a portion of a retirement account to someone other than the primary beneficiary. One spouse could use a QDRO to access payments as a form of spousal or child support.
Without a QDRO, a plan administrator can't give a former spouse funds from a retirement account, even if the couples agree to it via another document.
How does a QDRO work in California?
Retirement accounts grow with time. People (and their employers) put money in, and the funds grow with interest. These assets are considered community property via California law, and they should be split during a divorce.
Unfortunately, determining how much an account should go to one partner or the other can be difficult. Courts must untangle how much was in the account before the marriage and how interest profits should be split.
Officials use a Qualified Domestic Relations Order for Support (FL-460) form to outline what the couples agree to. This document can be filed with others used to finalize your divorce.
Can courts in California divide retirement plans?
Retirement plans can be incredibly valuable. They're also very common. Almost 35% of working-age people have an IRA, and the median value is about $30,000. As part of your divorce, the court must decide what to do with community property, such as retirement accounts.
There's no "best" way to divide a retirement plan with a QDRO. Courts consider plenty of factors, including these:
- The type of retirement plan
- The nature of the plan's benefits
- Why the parties want to divide them
A QDRO can’t award an amount that isn’t available in the plan, so you can’t ask for more money than your spouse has. This isn’t an opportunity to get revenge or derail your former partner’s future. Instead, this is a chance to get your fair share of assets earned or developed during the marriage.
What types of retirement plans do QDROs cover?
Many forms of retirement savings exist. While QDROs are meant for many of them, they're not designed for every type of retirement plan you might have.
You can use a QDRO for retirement tools like these:
- Private pension plans
- Employee stock ownership plans
- 401(k) plans
- 403(b) plans
- 457 plans
Retirement tools like IRAs are handled with different tools, like transfers. You can’t use a QDRO to handle them.
How to file a QDRO in California
Couples fill out financial documents at the beginning of the divorce process, including specifying how much is in both parties' retirement accounts. If spouses or partners agree on how much should go to each person, they can fill out the proper paperwork and move forward accordingly.
When couples can't agree, they hire mediators or attorneys to help. Some can do this work independently, but others must hire actuaries or other financial professionals to help them.
Once the form is complete and officially filed, couples must work with the company that manages the account. Companies like this typically follow this process:
- Accept: They require a certified order.
- Review: They look over the document and ensure it's legally binding.
- Pay: They notify the recipient of how to access the awarded amount.
How long does it take to get funds?
A QDRO is typically part of the larger divorce process, and timeframes are variable. Some people complete everything in weeks. Others battle over the details for months or even years.
The less you communicate with your partner, the longer the entire process will take. Do your best to collaborate, work through tough points together, and be reasonable with your demands.
Once the payor receives the paperwork, funds get transferred relatively quickly.
Is there a filing time limit?
A QDRO is most efficient when couples file the paperwork as part of their divorce. The funds here could help you understand spousal support payments, child support payments, and more.
There's no official limit on QDRO filing. You can choose to revisit this issue at any point during or after your divorce.
But in general, it's best to talk about all of your financial issues during your divorce. Timeliness and cooperation could help you get the compensation you deserve. And thinking through things early will save you headaches down the road.
How much will it cost?
Divorces can be costly processes, but when large amounts of fees are involved, it’s best to be proactive.
If you agree on terms relatively quickly, you could finish the QDRO process by spending a few hundred dollars. If you have complex accounts on the line and can’t come to terms, you could spend thousands on professionals to help you determine what is fair and equitable.
FAQs About Qualified Domestic Relations Orders. U.S. Department of Labor.
Who Has Retirement Accounts? (August 2022). United States Census.
FAQs Drafting Qualified Domestic Relations Orders. U.S. Department of Labor.
Retirement Topics (QDRO) Qualified Donor Relations Order. (September 2022). Internal Revenue Service.
Steps for Creating a QDRO. Fidelity.
What Is a QDRO?? (September 2022). U.S. News and World Report.