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Dividing retirement funds in divorce: looking at QDROs, P.2

We mentioned last time that an important tool in handling retirement assets in divorce is the qualified domestic relations order (QDRO). In addition to the requirements we mentioned last time, there are several negative requirements for these orders.

First of all, QDROs may not require a retirement plan to provide a spouse or the plan participant with any type or form of benefit that is not provided under the plan, or with increased benefits, or in the form of a qualified joint and survivor annuity for the spouse and his or her subsequent spouse. Neither may a QDRO require a plan to pay benefits to a spouse that must be paid to another “alternate payee” under another QDRO. 

An alternate payee may be a spouse, a former spouse, a child or another dependent of the plan participant. When a QDRO names a minor child or incompetent adult child as an alternate payee, it is possible to specify in the order that the payment go to an individual who has legal responsibility for the child.

A QDRO may be included as part of a divorce decree or property settlement, or it may be issued as a separate order, or altogether apart from the divorce process, as long as the order meets all the requirements. Though the timing of the order is not critical to its validity, it is important for couples to get such matters hammered out in the divorce process if at all possible.

Another point to keep in mind is that the decision as to whether a domestic relations order is qualified initially lies with the plan administrator. Typically, this is the employer which maintains the plan, or the association, committee, board of trustees or other group representing the parties who maintain the plan. If the plan administrator determines that an order is not qualified and thus not enforceable, this decision most likely has to be challenged in federal court. With proper drafting, this issue should not come up, but if it does, working with an experienced attorney can help ensure the matter is resolved.

Source: U.S. Department of Labor, “QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders,” 2014. 

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