The equitable distribution process which occurs during divorce often includes provisions for the reallocation of retirement plans.  This often includes the retirement plans or pension plans of one or both parties involved in the dissolution of the marriage.

What is a Qualified Domestic Relations Order?

From the Department of Labor website comes the following explanation:

A “qualified domestic relation order” (QDRO) is a domestic relations order that 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 a retirement plan, and that includes certain information and meets certain other requirements.

Reference: ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)

The division of the retirement assets is almost always included in the equitable distribution of marital assets. State statutes generally cover the distribution of assets during divorce proceedings. However, retirement assets are governed by Federal Laws and any distribution of them must comply with the Employee Retirement Income Security Act of 1974 (aka: ERISA). Additionally, the Internal Revenue Code of 1986 includes provisions which must be met.

Simply put, all retirement interests are assigned only by an order, a decree, or a judgment which recognizes a former spouse’s, children’s, or other dependent’s interest in a person’s retirements benefits. This is accomplished through the QDRO.

The following information must be detailed in the domestic relations order to qualify as a QDRO:

A QDROs must contain the following information:

  • The name and last known mailing address of the participant and each alternate payee.
  • The name of each plan to which the order applies.
  • The dollar amount or percentage (or the method of determining the amount or percentage) of the benefit to be paid to the alternate payee.
  • The number of payments or time period to which the order applies.

A QDRO may not contain the following:

  • The order must not require a plan to provide an alternate payee or participant with any type or form of benefit, or any option, not otherwise provided under the plan.
  • The order must not require a plan to provide for increased benefits (determined on the basis of actuarial value).
  • The order must not require a plan to pay benefits to an alternate payee that are required to be paid to another alternate payee under another order previously determined to be a QDRO.
  • The order must not require a plan to pay benefits to an alternate payee in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her subsequent spouse.

It is extremely important when the final judgment has been issued and approved that these criteria must be met in order to ensure that there are no delays or return visits to court for the distribution of the retirement assets to take place.

For more information about qualified domestic relations orders, QDROs, and equitable distribution of retirement plans during divorce proceeding, simply click on the links provided above.