Getting a QDRO in California
Understanding QDROs
Whether you live in California or reside in another state, if you or your spouse have retirement assets and they are to be split between you as a result of divorce, you will need a special Domestic Relations Order (DRO) from the court that meets the federal legal requirements of ERISA. See ERISA § 206(d)(3) here. Your separation agreement or stipulation of settlement will memorialize the way in which you decide to divide your retirement assets; although there are many ways to divide the benefits, your agreement might state, for example, that you receive 50% of the assets in your spouse’s 401(k) plan, plus or minus any loans from the plan and any gains or losses on that 50% share. Once you and your spouse have decided how you will divide the benefits, the description is put into a DRO directing the plan how and when to divide the benefits, along with other specific information required by your agreement and federal law. Pursuant to federal law requirements, this “DRO” will be submitted to the retirement plan and (if drafted correctly, according to the requirements of the plan), the plan will deem it “qualified” and it will become a “Qualified Domestic Relations Order” (QDRO). Regardless of your agreement or the court’s order, the division cannot take place and your rights are not secured until your DRO is qualified by the plan administrator and becomes a “QDRO.”
How Does a QDRO Work Within California Divorce Law?
Generally speaking, the QDRO process itself does not vary much from state to state. California law, or any state law for that matter, is relevant primarily because it determines what rights you have to the retirement benefits of your spouse. In other words the substance of your rights to a pension or 401(k) or other retirement plan are determined under California State law. All states recognize that retirement benefits earned during a marriage are marital property. Your California divorce lawyer should know whether, and how much, you are entitled to from your spouse’s plan under California law.
What your California (or other state) divorce lawyer might not be as familiar with are the substantive components of your retirement plan, the federal law governing retirement plans, and the federal rules applicable to plans as they relate to requesting information, drafting, and obtaining pre-approval of a QDRO. Pension and other retirement plans are complex, and it’s important that a divorce attorney understand all components of the plan before agreeing to the division and putting that agreement into writing. Your California attorney might want to work with an attorney that specializes in QDROs in order to ensure all components of the plan are taken into account in your divorce agreement. For example, if a pension is being divided, it is important to find out if there is a cash component to the benefit, which would need to be addressed separately in the DRO. Typically the pension plan document would reveal whether there is a cash component to the benefit, and other important information, such as the vesting schedule, earliest retirement age, and any special rules on collecting a greater pension should the participant become disabled, to name just a few. The language of your agreement is crucial because the QDRO is just the vehicle for splitting the retirement benefits, and it typically cannot provide more or less than was granted in your separation (or other) agreement.
Whether you reside in California or another state, your divorce attorney should either delve into and be knowledgeable about the retirement plans at stake and the applicable federal law, or work with a QDRO attorney to gather all the information and draft the correct language for fairly dividing the benefits at stake. A QDRO attorney will: know what information to gather and when; be able to clearly explain the complexities of the retirement benefits to be divided; draft the language to use in your agreement; draft the DRO and get it pre-approved by the retirement plan; and work with your California (or other state) divorce attorney to see it through the court system and the plan qualification process so that your rights are secured. Your QDRO attorney will be able to do the majority of the work from anywhere in the country, usually with minimal help from your divorce attorney.
If you have already received a California divorce, and now need only a QDRO, a QDRO attorney can do the vast majority of the work to ensure your rights are secured with the retirement plan. You may need a California attorney to simply file the DRO with the court at the very end of the process. But the majority of the work is done pursuant to federal law under ERISA, and it’s more important to use an attorney knowledgeable in that area up to the point you need the order signed by the court. That is the second-to-last step in a longer process that can be confusing or daunting to many state divorce lawyers--understanding, drafting, and getting your order pre-approved by the retirement plan. Obtaining the court’s signature on an order is the easiest part of the process.
Have Additional QDRO-related Questions?
If you or your divorce attorney have questions about the QDRO process, McKain Law can help. Contact us to discuss your particular circumstances and see if we can assist.