QDRO Attorney Services Serving Clients Across the United States

A QDRO Attorney Will Make Sure Your Retirement Plan is Fairly Divided and Distributed in Divorce

When spouses separate or divorce and divide their assets, one or more retirement plans are usually involved. Retirement benefits often represent a married couple’s largest or second largest asset, and for that reason divorce attorneys and spouses should pay careful attention to their treatment in the divorce.

Although divorces are decided under state law, retirement plans are governed by federal law if those plans are provided by a private employer. That federal law—the Employee Retirement Income Security Act of 1974, or ERISA—requires a special process for dividing retirement benefits. In particular, ERISA requires a Qualified Domestic Relations Order (“QDRO”)—a specific order that must be signed by a court or other agency and then accepted (“qualified”) by the retirement plan in order to be effective, and finalize the division. 

Retirement benefits provided to employees working for the federal or state government, or members of the military, also have special processes that must be followed if division is to be effective. We handle these types of divisions as well.

Who we help wITH OUR QDRO ATTORNEY SERVICES: 

• Ex-spouses that need a QDRO (or similar order) after their divorce is final;

• Family law attorneys handling a divorce who need to understand and negotiate retirement benefits, and ultimately need a QDRO or other order;

• Mediators or collaborative attorneys helping couples through divorce who are not familiar with the technical rules of ERISA or other laws governing retirement benefits; and

• Ex-spouses, parents, or guardians who are owed maintenance or child support and whose ex-spouse has retirement assets in his or her name somewhere in the country.

What is a QDRO and How Does it Work?

A “QDRO” is a term of art defined by section 206(d) of the Employee Retirement Income Security Act of 1974 (“ERISA”). Specifically, a QDRO is a domestic relations order issued by a state agency or institution (usually a state court) with the authority to issue an order or garnish wages. Typically, the order stems from a need to: divide retirement benefits that are marital property in a divorce; pay current or back-owed maintenance to a spouse or ex-spouse; or pay child support, usually an amount owed in arrears. The order tells the retirement plan how to divide the money, identifies the “alternate payee” who will receive the funds, and directs the plan where and when to provide the amount owed. The order cannot contradict the terms of the retirement plan or it will be rejected.

The attorney preparing the order should be very knowledgeable about the technicalities of pension and retirement plans and familiar with ERISA’s QDRO regulations. Negotiating, drafting, and seeing a QDRO through to qualification is a process that can take from two to 12 months. Where the divorce judgment was issued prior to the QDRO being drafted, it can take much longer due to lost records, an uncooperative ex-spouse, a plan administrator’s lack of knowledge about the QDRO rules, or other obstacles.

QDRO Preparation

Retirement assets can be significant. If a couple is divorcing, it is important to carefully review all retirement benefits at stake. The divorce attorney should collect information about the retirement plans during the divorce process, just as she or he would collect other information about net worth. Once in hand, the attorney(s) should review the plan and negotiate the terms of the QDRO. The attorney for the “alternate payee” should make sure the terms are written into the separation or stipulation agreement, because that language will govern the QDRO’s content. Ideally, the order is drafted and sent to the retirement plan for preapproval; once preapproved, it is sent to the court for review and signature. After filing and obtaining a certified copy, the attorney submits the order to the plan administrator for qualification. If the plan administrator does not approve the order, you do not have a QDRO. Once the order is qualified, the attorney should receive an interpretation letter explaining the way the plan will execute the order, and review it for accuracy.

If the divorce was finalized without reviewing the plan or drafting the QDRO, the attorney should still review the plan information and the parties’ separation or stipulation agreement and draft the order, then submit it to the ex-spouse and retirement plan for preapproval, as described above.

QDRO Rules & Requirements

The United States Supreme Court has often stated, in various ways, that ERISA is “an enormously complex and detailed statute.” Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993).  Because retirement plans are subject to complex rules and may be drafted in hundreds of ways, it’s important for you or your divorce counsel to work with an attorney who understands this area of the law. For example, attorneys may believe it is sufficient to state that their client is entitled to a “marital share” of a pension benefit without realizing that all ERISA pension plans are required to provide survivor benefits in case a participant dies before or after retirement. Where divorce occurs, the spouse loses this “survivor” protection, but a QDRO can reinstate the marital share of those benefits for an ex-spouse if it is properly drafted. Time is also of the essence when drafting a QDRO, because if a participant dies before the QDRO is approved, it may mean a complete loss of benefits.

• Retirement assets may be significant, making them worthy of detailed attention during the divorce. This is your future income, and should be a primary concern for divorce attorneys and their clients.

• Focus on gathering retirement benefit information as early in the process as possible. Most people do not know much about their benefits, due to their complexity; obtaining specific information will empower you in deciding what to keep or give away.

• Family law attorneys may need assistance with the specialized area of retirement plans, because this is a specialized and complex area of the law.

• Every retirement plan has unique rules and features—request and analyze the retirement plan document or summary plan description. These documents should explain in detail the way your benefit is structured.

• Describe in your separation agreement, or stipulation, all aspects of the retirement benefit to be shared, or you may lose portions of the benefit.  

• Take these steps and draft the QDRO or other order before the divorce is final, if possible, while both parties are motivated to finalize the divorce. It will keep expenses down and result in less stress.

• If your divorce is final you should still take these steps. Don’t be penny wise and pound foolish: the future or current income to be gained by properly dividing your benefits usually far outweighs the cost and any frustration in obtaining the order, even after divorce.

Whether you are dividing a pension, 401(k), cash balance, or other type of retirement plan, you will have to understand and navigate the benefits and requirements of each in order to obtain your fair share as part of a divorce. How is this best accomplished?

Obtain the plan documents. After meeting some basic legal requirements, employers are free to design their retirement plans any way they see fit. That means that neither you nor your attorney will know what the plan offers if you do not review the terms of the plan. For example, does the employer’s 401(k) plan permit loans? Does that same plan have a tiered vesting schedule? If a pension is at stake, does it offer early retirement, a disability pension, or cash benefits? Reviewing the plan document will ensure that the benefits are divided fairly, and obtaining that information should be done as early in the divorce process as possible.

Document the benefits to the alternate payee (non-owner spouse). One important reason to gather retirement information during the divorce process is to ensure that the separation agreement or stipulation spells out all aspects of the benefits. It is not enough to state that the ex-spouse is entitled to a "marital share" in your agreement. Once the agreement is final, the QDRO will reflect the negotiated language. For example, if your agreement does not state that you are entitled to a marital share of a pension plan’s pre-retirement survivor benefits (automatically lost on divorce), most state court judges will say that the QDRO cannot include them. In that case, if your ex-spouse passes away before retirement, you will receive no benefits at all.

Start the QDRO process as early as possible. ERISA does not require a judgment of divorce to obtain a QDRO. The QDRO should be drafted after reviewing the plan document and before the divorce is final. After the divorce, there is no incentive for the plan participant spouse to cooperate with the process. That is typically a large obstacle to obtaining a QDRO after a final divorce, but there are also other, often significant, stumbling blocks to obtaining the QDRO if it is delayed beyond divorce.

Whether your divorce is in its early stages, or it was final one year ago or twenty years ago, you should begin the process of drafting and submitting a QDRO to the retirement plan as soon as you realize you need one, otherwise some or all of your share of the benefits may be lost.

Draft the order and submit it to all parties and the retirement plan. It is very important to put the retirement plan on notice that the QDRO process is underway and there is an alternate payee entitled to a portion of the benefits. ERISA provides an 18-month hold period to protect the alternate payee’s share of the benefits from being distributed to the participant during the QDRO process, and most plans will place a hold on a plan that has an account balance (like a 401(k) plan) or, in the case of a pension that is in pay status, segregate the alternate payee’s share into a separate account awaiting final qualification of the order. Even if changes must be made to the order, putting the plan on notice will preserve the alternate payee’s benefits during negotiations, while changes are being made to the order, or while the parties await a judge’s signature on the order. In addition, getting the order “preapproved” by the plan saves time later, and avoids the situation where a court must sign a second, amended order that meets the plan’s approval.

Maintenance, Child Support, and Children's Health Care Benefits

What else can a QDRO do?  ERISA specifically provides that a QDRO may be used to collect ongoing or back-owed child support or spousal maintenance. Because of ERISA’s federal reach, a QDRO can be a very effective way to obtain child support or maintenance owed, regardless of where the ex-spouse lives. If you are owed court-ordered child support or maintenance payments, McKain Law, PLLC might be able to help you collect them with a QDRO.

In addition, your childrens’ health benefit coverage may be secured during divorce through a Qualified Medical Child Support Order (QMCSO), another aspect of ERISA. A QMCSO requires the health plan administrator to ensure that your children are enrolled in your ex-spouse's health plan, if the ex-spouse is required to provide that benefit in your separation or settlement agreement. This takes the responsibility of enrolling the children off of the parent, and puts it on the health plan, by court order.

Is There a Time Limit to File a QDRO?

Technically, no, at least not under ERISA. Although there is no QDRO statute of limitations in ERISA, delaying the process creates many other obstacles and can be much more expensive the more time that passes. The risk of losing your benefits entirely also increases with time, for example, because of an early death. For 401(k) and similar plans, you may lose the ability to calculate the gains on your share if too much time passes.

How Long Does a QDRO Take?

Where all parties cooperate and major obstacles do not arise, it can be two to six months from the start of the QDRO process to completion. If the divorce is final and the parties are not amicable, it can take six months to two years for the entire process. It is always best to start investigating the retirement benefits to be divided as soon as possible.

Can You File for a QDRO After Divorce?

Yes, but it is much more efficient, and less costly and stressful, to at least draft your QDRO before the divorce is final. Nevertheless, retirement benefits are often significant, so even if it is more difficult or costly after divorce, it is usually worth it financially to obtain the QDRO. The extra income may make a big difference to you in retirement.

Can my Divorce Attorney Handle My QDRO Needs?

Possibly. If your attorney has worked extensively with retirement benefits and QDROs, he or she may understand the type of detailed information to be gathered, all the steps to take and questions to ask related to the retirement plan, and the time needed for the process. However, most divorce attorneys do not like to handle QDROs and understand they may not have the requisite retirement plan knowledge to handle them properly. Many attorneys prefer to send their client off after the divorce to have someone else do the QDROs. It’s best if a divorce attorney works in conjunction with another lawyer who can assist with this one narrow area of the divorce.

Do I Need a Local Attorney to Obtain a QDRO?

For the most part, no, you don’t. ERISA is a federal law and the same QDRO rules apply across the country, regardless of your location. To the extent an order must be filed in your state court, that can be accomplished with a local attorney, or even on your own. It is more important to have an attorney knowledgeable about dividing retirement benefits than it is to have a local attorney.