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What are QDROs and how do they work?

What are QDROs and how do they work?

Most divorcing couples in the state of Washington do not have significant assets apart from their house, joint savings and retirement accounts, and pension plans. When a couple gets divorced, the court will divide these assets between the two spouses. Dividing retirement and pension plans can be complicated, and a legal device is known as a "Qualified Domestic Relations Order" (QDRO) has been created to ease the division process.

Because retirement and pension plans are separate legal entities and are not usually made parties to the divorce proceedings, they are not under the jurisdiction of the court. In addition, each plan has a contract with the beneficiary that specifies how the plan's balance will be distributed. Many divorce settlements change the distribution formula and therefore, change the terms of the plan. The United States Department of Labor has jurisdiction over retirement plans under the Employee Retirement Income Security Act (ERISA), and it created QDROs to solve this problem.

A QDRO is a legal order issued by a state court or any other state agency that has the power to issue orders providing for child support, alimony and other issues that normally arise in a divorce. The parties to the divorce are not required to approve a QDRO, although a court will usually incorporate the terms of a voluntary division into all orders that affect the division of the couple's property. The essential term of any QDRO is the creation of an alternate payee under all plans that it affects. The plan must pay benefits to any and all alternate payees as set forth in the QDRO. Thus, if only one spouse has a retirement plan, a QDRO can require the plan to pay benefits to both spouses.

Drafting a QDRO can be a complex process, and while many examples may be found on the Internet, the advice of an experienced family law attorney can protect against prejudicial mistakes. Anyone desiring a QDRO or anyone who has been given a draft QDRO to review may wish to consult a divorce attorney for advice before accepting the plan.