During a divorce, a couple's marital property is divided—property which may include retirement accounts and pensions. In order to allocate retirement accounts and pensions, documents called Qualified Domestic Relations Orders (QDROs) are necessary to divide a couple's retirement assets. However, most people are strangers to these documents until they require one. Therefore, familiarizing yourself with a QDRO, before your divorce proceeding gets off the ground, can be helpful.
What Does a QDRO Do?
A QDRO is a document that helps apportion percentages of any interest you may have in a retirement plan, such as a 401(k) or a pension. If your interest is in a public state entity, such as a Chicago Public Schools pension, you will need a document with specialized language known as a QDILRO, though they are functionally very similar.
Most often, what occurs is that two people draw up a property settlement, or the court may do so if they are unable to agree, that contains certain specific information. One piece of required information is the name of an ‘alternate payee,' or the person to whom a part of the asset is to go. Without an alternate payee's name, a domestic relations order cannot be a QDRO. Language is important in the domestic relations order because it can also disqualify the order if it grants, for example, interests in a retirement plan that have not yet vested, or fails to take into account the need for an alternate payee if the named payee were to die before his or her ex-spouse. Once the order meets the satisfaction of the court, it is signed into the record by the judge.
Requirements and Prohibitions
There are certain criteria that a domestic relations order must meet in order to be a QDRO, and there are also provisions that a QDRO must not contain. An order must contain not only the name of the alternate payee (most often, the ex-spouse), but also their information, the name(s) of the plan(s) affected by the order, and the dollar amount in question, if known. Without any of these pieces of information, the rationale holds, the alternate payee cannot receive his or her share of the asset. Therefore the order is not doing its job.
By comparison, there are specific provisions that invalidate an order if they are present. A domestic relations order may not, for example, grant any benefit to which the regular payee would not be entitled if there was no order. Another provision is that a QDRO may not grant benefits to an alternate payee that were already earmarked for a previous beneficiary (this is most common in situations with multiple ex-spouses). Any of these issues will render an order invalid, as QDROs do not usually contain a severability provision.
Seek Experienced Legal Assistance
While a divorce can be a long, complex process, it does not have to be. Having a knowledgeable divorce attorney on your side can make a difference. Our compassionate Wheaton, Illinois asset division attorneys are well versed in these issues and are happy to work with you to resolve your issue in the best possible manner. Contact us today via phone or our website to set up an initial appointment.
Sources:
https://www.dol.gov/ebsa/faqs/
http://www.ilga.gov/
