Your divorce has ended and your attorney has told you that it is now time to prepare a Qualified Domestic Relations Order in order to divide you and your spouse’s retirement accounts.

What is a Qualified Domestic Relations Order?

Qualified Domestic Relations Orders (QDROs) enable distributions to be made from retirement plans such as defined benefit or pension plans, defined contribution plans, individual retirement plans (IRAs), annuity plans, etc. to the spouse or former spouses of the plan owner provided that such orders are qualified. The spouse or former spouse is known as the “alternate payee” and has the right to receive a portion or the entire benefit payable to the spouse who is actual owner of the retirement plan. The owner of the retirement plan is known as the “participant”.

Why do they need to be qualified?

The Order needs to be qualified by the plan that administers the retirement plan in order to insure that the benefits the alternate payee receives are taxed appropriately.

What does it mean to be qualified?

The Order becomes qualified when they meet the various requirements set forth by the Internal Revenue Service and federal regulations which set forth the basic guidelines for all QDROs. Essentially what this means is that the QDRO must be designed in such a way so as to insure that the distribution to the non-owner spouse is divided and deposited in an account without any immediate tax consequences to either party. So what the QDRO does is create a separate account or interest for the alternate payee without having any effect on the participant other than assigning a portion of his or her benefit away to the alternate payee. Therefore, the recipient spouse is not taxed on the receipt of the distribution and the participant is not taxed on the withdrawal of the distribution.

Can QDROs be used to enforce child support obligations?

The other, although not frequently used advantage of QDROs, is using them to enforce collection of child support obligations. A QDRO can be used to collect child support arrears or be used to secure payment for child support obligations regardless of whether or not the participant’s retirement plan is in pay status. The timing of when a QDRO can be used to enforce child support orders differs from plan to plan, but many plans provide methods in which a QDRO can be used to pay child support obligations even if the participant is far away from retirement.

What does my attorney need to prepare a QDRO?

You should provide your attorney with the name, address, and social security number of the participant, as well as a copy of the summary plan description for the retirement plan, the plan’s written QDRO procedures, if available, and a most recent annual benefits statement indicating the current value of the plan. If you do not have access to this information at the onset of your divorce matter, you will need to make sure that the owner spouse provides this information to your attorney during the discovery stage of your divorce matter. 

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