Retirement plans are created with the intention of providing an individual with benefits that will give them financial support once they retire. In an effort to prevent these programs from being used in unintended ways, the laws regarding retirement plans are designed to prevent retirement benefits from going to anyone but the person who has taken out the plan. However, there are some exceptions to these retirement laws. A qualified domestic relations order (QDRO) is one of these exceptions.
What is a QDRO?
If a couple decided to dissolve their marriage or to legally separate, the normal course of action is to divide the property they shared. Retirement plans often represent a large portion of the assets a couple has amassed over the course of their relationship. However, most retirement plans only allow the sole owner of the plan (a.k.a. the plan's participant) to get benefits. This is where the QDRO comes in.
Simply put, a QDRO is a judicial order that divides the benefits in a retirement or pension plan between the plan's participant and their former spouse. These benefits often come in the form of the plan provider paying child support or alimony to a spouse, child, or dependant. Anyone who is not the participant and who is assigned the right to collect benefits from the participant's plan is known as an alternate payee. The QDRO itself must also contain certain information to be considered valid. This includes:
· The name and address of the participant and any alternate payee.
· The name of every plan to which the QDRO is applied.
· The dollar amount or percentage of the benefits that will be given to every alternate payee listed in the order.
· The number of payments or time period of payment.
While a QDRO can work well in some situations, not every retirement or pension plan is eligible to be divided. In order for a plan to be eligible for division by means of a QDRO, the plan must be subject to the Employee Retirement Income Security Act (ERISA). The ERISA is a federal law that sets appropriate standards for private pension and health plans.
The US Department of Labor has released a document that outlines the general guidelines and applications of QDROS. This is a good start, but these issues involve many different laws and legal matters and quickly become very complicated. If you are considering attempting to get a QDRO or have questions regarding them, it is highly suggested that you obtain the services of a legal professional who specializes in these types of cases. They will be able to assist you as you move through the legal process.