What is a QDRO and Does Your Divorce Need One?

Posted On October 14, 2020 Divorce

A QDRO (pronounced “kwadro”), is a Qualified Domestic Relations Order that creates an alternate spouse’s right to receive all or a portion of the benefits payable under a retirement or pension plan. Since any of your marital assets can be subject to division upon divorce, that includes retirement accounts that either spouse contributed to while married. A QDRO filing will typically be required to split or transfer the benefits. This type of order is very complex, and even a simple mistake in filling one out can have costly ramifications on a divorce settlement. 

Not every retirement plan needs to be divided during a Washington divorce. Have your case assessed by an experienced Spokane divorce attorney who can advise you on whether a QDRO is necessary. 

How Do Retirement Plans Get Divided?

Retirement plans are typically one of the more challenging assets to value and divide. How it is done will depend upon which type of plan it is. Most states will divide only the contributions made and any associated growth that occurred from the date the marriage took place to the date of separation. Pensions, on the other hand, are a bit trickier. Especially if the participant spouse has not yet retired. An attorney along with a financial advisor can be considerably helpful in valuing and splitting the assets. 

When is a QDRO Required?

Any type of retirement account that is subject to federal laws, under the Employment Retirement Income Security Act (ERISA) will require a QDRO. That includes defined benefit plans, or pension plans, as well as defined contribution plans, such as a 401(k), 403(b), or an employee stock ownership plan. Other accounts that are not covered under the ERISA, including individual retirement accounts (IRAs) and military pensions, do not need this specific type of order to be divided. 

A QDRO must be approved by the plan administrator and the court. Only then, can a portion or the entirety of the account value be withdrawn and subsequently transferred to the alternate spouse’s account tax-free and without the usual early withdrawal penalty. Each retirement account must have a specific QDRO tailored to it, with details of the plan and the exact amount or percentage to be awarded, or a formula to be used to calculate the award. 

What if a QDRO is Not Filed?

Not filing a QDRO can have a dramatic impact on the resolution of your divorce settlement. Even when a judgment or settlement agreement states that a 401(k) or pension plan is to be divided, most plan administrators will not do so without a QDRO. It is possible to enter a QDRO following a divorce decree. However, there are few reasons why you should not delay. Particularly, if the participant spouse is close to retiring. Once the collection of benefits begins and there is no QDRO, the alternate spouse may not be able to recover his or her share retroactively. Other reasons to quickly file, include the participant possibly taking out a loan, liquidating the account, or relocating and being difficult to find.  

Consult a Spokane Divorce Attorney

The QDRO is one legal matter that can easily fall through the cracks if you’re not careful. Contact Twyford Law Office for a free consultation, so our team of highly experienced divorce attorneys can review your case and ensure you receive the assets to which you are entitled to.