Learn more at the Law Office of Ronald L. Hendrix website.
When a divorce
settlement is final, the legal document known as the Martial Settlement
Agreement will detail how a divorced couple’s marital assets will be
divided. This includes all substantial
property, including retirement plans. In
order for the division of a retirement account to take place there may be the
need for a legal mechanism, referred to as a Qualified Domestic Relations Order
or QDRO (pronounced “quad row”).
What is a QDRO?
Simply put, a QDRO
is a court order which recognizes an alternate payee’s ownership of a portion
of an employee benefit or pension plan subject to ERISA (Employment Retirement
Income Security Act), a federal law dating back to 1974 that provides structure
for the types of retirement accounts available to employees.
Preparation of a
QDRO is a multi-step process, and it is important that it be prepared properly.
When seeking a divorce attorney, include questions about experience completing
QDROs, what the office’s process is, and the approximate cost.
The initial step
is to gather all pertinent information to the plan or plans being divided or
equalized. This includes statements of
balance of the accounts as of an agreed upon date (most often the date of entry
of the judgment), and obtaining a copy of the Summary Plan Description from the
Preparation of a QDRO
offices prepare QDROs for their clients in-house, while others may contract
with a company that specializes in their preparation. In either case, the
content of the QDRO will be carefully prepared and reviewed to insure that it
details the proper division of benefits and has all of the parties’ personal
information correct. At this stage in the process, the document is a Domestic
Relations Order (DRO). Once the paperwork is completed, it is submitted to the
administrator of the retirement plan for approval that it is a Qualified Domestic Relations Order, or QDRO.
Approval by the plan
administrator is the longest part of the process. The DRO will be reviewed to
be sure that it meets the requirements of the plan it pertains to. If it does
not for any reason, it will be edited based upon the plan administrator’s
recommendation. If the DRO meets the
plan’s requirements, the plan administrator will issue a letter to all parties
informing them that it is a QDRO. This
step can sometimes take as long as six weeks even without the need for a
The final draft
will be issued and both attorneys will sign off on the QDRO, and then it will
be scheduled for presentment to the court and presented to the judge for
signature. It will then be filed with the Clerk of the Court, and certified
copies can then be purchased. Finally, a certified copy of the QDRO is sent to
the plan administrator to be implemented.
Does a QDRO Apply to my Retirement Account?
It is important to
note that not all retirement accounts and pension plans require a QDRO. Only private sector retirement accounts and
pension plans that are covered under ERISA require a QDRO. In Illinois, public
sector (ie. firefighters, police and teachers) employees’ retirement accounts
are instead divided by a Qualified Illinois Domestic Relations Order (QILDRO)
which has separate requirements and is more restrictive than a QDRO. QDROs are also not available for government or
military retirement accounts, but these are divided by a similar document.
The proper division
of retirement and investment accounts is an important final step in a divorce. QDRO paperwork should be completed with
accuracy and the process streamlined to avoid unnecessary lost time and
expense. It is important when you have retirement accounts to be divided, that
you to work with a divorce attorney who has experience with the type of
retirement account to which you contribute through your employer.