What is a QDRO?
A qualified domestic relations order, or QDRO (pronounced "quad-ro"), is a court order which is used to divide a retirement plan. The actual order may be a qualified domestic relations order for a private plan or domestic relations order (DRO) for a public plan. A QDRO can also be used to collect alimony or child support.
When you get a divorce, the only way to get the money paid from one spouse's retirement account to the other spouse is with a QDRO. Simply stating that the spouse is awarded a community or marital property interest in a retirement asset will not divide the benefit.
Retirement plans are not required to follow court orders awarding one spouse a portion of the other spouse's retirement benefits unless the court order is a QDRO. Also of note: F or domestic partnerships, direct payments to a former spouse from a retirement plan can be paid from a state public plan with a DRO, but it cannot be paid from any private employer plan or federal plan.
The risk of preparing your own QDRO
It's possible to prepare your own QDRO, but they are complicated, and they are not enforceable if incorrectly prepared. There are laws to protect retirement division, but few people know how to divide them. It's hard to know who to trust. Some retirement accounts have QDRO forms which are provided to the parties in divorce by the retirement plan. But these sample QDROs can be confusing and are usually drafted to benefit the plan, so they are not necessarily trustworthy.
Searching online for QDRO help can be overwhelming, as there are several bad preparers out there that promise low rates but deliver even lower quality. QDROs are specific to each plan and can be complex. There is no one-size-fits-all QDRO. Getting it wrong could lead to permanent loss of survivor benefits.
Getting QDRO help
QDROCounsel is a legal technology company for the pension division founded and backed by a team of nationally recognized QDRO and valuation experts. We are proud to partner with Hello Divorce to make sure you have the support, coaching, and guidance from our experts, including QDRO attorneys. Generally, you must do a separate QDRO for each plan. Each retirement plan is governed by different rules depending on the plan type (i.e., 401(k), pension plan, 403(b)). Each QDRO must be tailored to the requirements of each plan. There are two types of retirement plans: defined benefit plans and defined contribution plans.
Defined benefit plans
Defined benefit plans are either traditional pension or retirement plans (usually monthly payments over time) or cash balance plans (lump sum payments with the option for monthly payments over time). Many mid-size to large private companies have defined benefit plans for their employees (e.g., AT&T, Boeing, Disney). Examples of state public-defined benefit plans include the Public Employees Retirement System (PERS) and the State Teachers' Retirement System (STRS). Large county plans also have their own defined benefit plans (e.g., SFERS, LACERA in California). Federal public defined benefit plans include the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) for federal employees and the Armed Forces Retirement System for military members.
Defined contribution plans
Defined contribution plans have pretax money deposited directly into an account for each employee. Contributions may be made by the employee, the employer, or a combination of both. Almost all are paid as a lump sum payment. Although many people refer to a defined contribution plan as a 401(k), the plan may be one of the following:
- 401(k) plan
- Profit-sharing plan
- Savings plan
- Money purchase pension plan
- Employee stock ownership plan (ESOP)
- 401(a) plan
- 457(b) plan
- 403(b) plan
- Tax-sheltered annuity
- Thrift plan
- Deferred compensation plans
Knowing what you have
Most private companies offer their employees defined contribution plans. Mid-size to large private and public employers likely have both a defined benefit plan and a defined contribution plan for their employees. Often in divorce, parties unknowingly divide just one of the two plans. For example, the divorce judgment might award the marital or community property interest in one party's 401(k). That party may also have a traditional pension to be paid monthly for a lifetime – but at a later time. That is the million-dollar asset, and it is often missed!