We specialize in preparing court orders to divide benefits under all types of retirement plans, including 401(k), 403(b), 457 retirement account plans, Thrift Savings Plans, Traditional Defined Benefit Pension Plans, Cash Balance Pension Plans, Federal, State and Municipal Pension Plans, Military Pension Plans and IRAs. We have worked with hundreds of retirement plans and have been preparing Qualified Domestic Relation Orders (QDROs), Domestic Relations Orders (DROs), Retirement Benefit Court Orders (RBCOs), and Military Pension Division Orders (MPDOs) since 2005.
QDROs must be drafted properly to ensure that you do not lose valuable benefits assigned to you.
Qualified Domestic Relations Orders (QDROs) are required to transfer qualified retirement assets to a former spouse in a divorce or legal separation and may be accepted to divide non-qualified retirement assets. We carefully draft the QDRO to properly reflect the provisions in the Settlement Agreement. If key provisions have not been addressed in the Settlement Agreement, we will identify them and try to work with the clients/attorneys to rectify the omission. From drafting the QDRO, working with the Plan Administrator to get preapproval, obtaining party signatures, filing the QDRO with the court and submitting the court-certified QDRO to the Plan for processing, we streamline the QDRO process to help you move forward during a challenging time. We take the guesswork out of QDROs.
Qualified Plans
Under Section 401(a)(13) of the Internal Revenue Code, a qualified retirement plan may transfer plan assets to a former spouse in a divorce only via a QDRO. The QDRO is a court order that implements the property settlement ordered by the court in the Dissolution of Marriage Judgment. The QDRO must be drafted to reflect the benefit awarded by the court to the former spouse, who is referred to in the QDRO as the Alternate Payee. If the Judgment does not address certain key elements, the QDRO cannot provide for these elements unless both parties agree post judgment to include them.
A qualified retirement plan includes:
- Non-governmental Plans subject to ERISA (Employee Retirement Income Security Act)
- Federal, State and Municipal Plans
- Military Pension Plans, which are divided by a MPDO (Military Pension Division Order)
- Military and Federal Thrift Savings Plan (TSP)
- 401(k), 403(b) and 457 individual account plans
Key elements include:
- Valuation date
- Adjustment for investment gains/loses
- Cost-of-living adjustment (COLA)
- Inclusion or exclusion of loans
- Survivor Benefits
Child Support Orders
A QDRO may be used to pay court ordered arrearages owed for past child support obligations. If the child is a minor, the QDRO may provide for a dollar amount paid from a participant’s retirement account to the legal representative for the child. The child would be the Alternate Payee and the payment would be taxed to the participant. If the child is not a minor when the arrearage is paid, the QDRO would be drafted with the spouse owed the arrearage as the Alternate Payee and the payment would be taxed to the Alternate Payee. The amount of the arrearage would be grossed up for estimated taxes.
Non-Qualified Plans
A non-qualified plan is a plan for highly compensated employees, typically provided in addition to a qualified plan, is not subject to ERISA, is subject to the rules under IRC Section 401A and may, but is not required to, accept a QDRO to divide plan benefits. If the plan will accept a QDRO, the benefit will be paid directly to the Alternate Payee. If the plan will not accept a QDRO, the court ordered benefit must be paid via the participant, potentially creating tax issues which must be addressed.
IRAs
An Individual Retirement Annuity or Individual Retirement Account (IRA) is not divided by a QDRO. The funding company may require a Domestic Relations Order (DRO), which is structured like a QDRO, and/or may require completed IRA Transfer Forms.