A qualified domestic relations order (QDRO) is a legal document issued by a court in connection with a divorce, legal separation or the division of marital assets. It specifically relates to the division of retirement or pension benefits between the divorcing spouses.
The QDRO instructs the administrator of a retirement plan to distribute the benefits as outlined in the order, allocating a portion of one spouse’s retirement benefits to the other spouse.
What plans are divided using a QDRO?
QDROs are used to divide retirement plans, such as 401(k)s, pension plans and 403(b)s, without incurring the usual taxes and penalties associated with early withdrawals or transfers from these accounts. The order must meet certain requirements under the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) in order to be considered a legal QDRO.
A QDRO must contain specific information, including:
- The name and mailing address of the plan participant and the alternate payee, who is usually the other spouse
- The name of each retirement plan that the order applies to
- The exact method of division, which is either a dollar or percentage amount
- The number of payments or time period to which the order applies
It is essential that a QDRO meets all legal requirements and accurately reflects the agreed-upon division of retirement benefits. The plan administrator has to review the document and can send it back to the court if anything is amiss. Once the QDRO is approved by the court and the retirement plan administrator, the benefits can be divided and distributed as specified in the order. Having experienced legal guidance is important when a QDRO is part of a divorce.