What is a QDRO (Qualified Domestic Relations Order)?
A Domestic Relations Order is a judgment, decree or order signed by the Court that is made pursuant to the state’s domestic relations law, and related to the provision of child support, alimony payment or marital property rights for the benefit of a spouse, former spouse, child or other dependent of a Plan participant.
A Qualified Domestic Relations Order is a Domestic Relations Order that, in order to provide for child support, alimony or transfer of property, creates or recognizes the existence of an “alternate payee’s” right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under an ERISA (Employee Retirement Income Security Act of 1974) controlled retirement plan, and meets the requirements under ERISA so that it is “qualified”. The Plan Administrator decides if the Order is “Qualified”.
Many public sector plans (eg FERS, CSRS, Colorado PERA, Military Pensions, TSA) are not covered by ERISA but still require a Court Order for a division or transfer of funds from the Participant’s retirement account to the ex spouse. These orders are not “Qualified” orders, and go by different names. Each has its own procedures to follow.
Who can be an Alternate Payee? An Alternate Payee cannot be anyone other than a spouse, former spouse, child or other dependent of a plan participant (or their Guardian).
Why do I need one?
a) If your separation agreement or divorce decree specifies that an ERISA controlled retirement plan is to be divided or transferred, then you will need a QDRO to make that happen, unless all of the information that is needed by the Plan is included in the Separation Agreement. (However, even though the law specifies that if all the information needed is in your separation agreement or decree, Plans often require a separate document.
b) You might also need one if your ex spouse has not paid child support or alimony, and has a retirement plan from which funds can be transferred to fulfill all or part of the outstanding obligations.
Is there a time limit? For ERISA controlled accounts, there is no time limit, but the longer you wait after your divorce, the higher risk you take that the funds are no longer there. For Colorado PERA, some State and Local Government Plans, and some other non ERISA accounts, you must get the paperwork completed within 90 days of the date of your decree of dissolution of marriage.
Different types of plans
Individual Retirement Plans (eg IRAs, Roth IRA). These are not covered by ERISA and thus you should not require a Court Order to have the funds transferred after your divorce. Contact someone knowledgeable at the institution where the IRA is held and ask for the procedures and necessary forms to transfer an IRA pursuant to divorce.
Defined Contribution Plans (eg 401(k), 403 (b), 457, TIAA/CREF, etc). These are accounts in which you (and perhaps your employer) make contributions to an account on your behalf, generally pre-tax. You will get a statement indicating exactly how much is in your account, and if any of it has not yet been vested (the employer’s contributions may not be “yours” until you have been employed for a certain number of years).
Defined Benefit Plans (ie Pension plans). These are plans where your employer (and perhaps you) make contributions to a fund in which your benefit is payable at a certain age or length of service. The benefit you receive will usually depend on the number of years you have worked and your earnings.