QDRO is a Qualified Domestic Relations Order. A QDRO is a domestic relations order issued under Texas family law by a family court after a divorce to divide an employer-sponsored retirement account between spouses. Assets contributed or accrued in a retirement plan, such as a pension or 401k plan, during a marriage are community property in Texas and subject to division during a divorce. The QDRO allows the employer’s plan to divide account and provide a portion to the non-employee spouse for a portion of the assets contributed to the plan during the marriage. QDROs are complex orders because they must comply with both the divorce decree signed by the family court and the retirement plan’s rules for distributions. QDRO Lawyer Adam Kielich is experienced in retirement plan issues and QDRO drafting.
The difference between a well constructed QDRO and a generic order can be hundreds or even thousands of dollars. Many family lawyers can draft a QDRO for you but few have actual experience working with the retirement plans to make sure the order is properly drafted and drafted in the way most advantageous to you. I worked with both 401k and pension plans before becoming a lawyer and I have seen firsthand the financial disadvantages of a poorly drafted QDRO. A poorly drafted order may not meet the plan’s rules and therefore the plan cannot divide the assets and pay them to the non-employee spouse (known as the “alternate payee”). This can cause delay in dividing the assets and if the plan cannot determine that the order meets the plan rules then the order is worthless because the plan is prohibited by law from distributing assets to the alternate payee until an order is submitted that meets the plan rules.
Steps to divide a 401k or pension with a QDRO
- Family court signs a divorce decree that includes the division of retirement plan assets.
- The family court signs a Domestic Relation Order that commands the plan to divide the plan based upon a formula specified in the order.
- The order is submitted to the plan for review and processing.
- The plan administrator has up to 180 days to review the order and determine whether it meets the plan rules.
- The plan administrator either qualifies the order and begins processing the division or rejects the order because it does not meet plan rules.
- If the order is rejected the plan will not divide the account and you must return to court for the judge’s signature on a new order and resubmit it to the plan for review.
- If the order is qualified by the plan administrator then the plan assets will be divided based on the order and distributed or assigned to the alternate payee based on the QDRO terms.
Other employee benefit plans, such as executive compensation and stock plans, can be segregated by a similar order but they do not have the Q in QDRO because the benefit plans are not qualified plans under ERISA and IRS regulations. These orders are also domestic relations orders (DROs) and the same issues can arise if these orders are not properly drafted. The rules on these plans may be even more complex than a 401k plan and require advanced understanding of ERISA and other benefit plan regulations to efficiently complete the division of these assets. I also have experience working with executive compensation plans and can assist in drafting these orders.
Need a QDRO?
The easiest way to prepare for an effective QDRO is to properly define the division of retirement plan assets during the divorce process so if you work with my firm for your divorce we can make sure the QDRO will gain approval by the plan. We will discuss your needs for a QDRO or DRO for benefit plan assets while discussing our strategy for your divorce. However, if you decide to work through an uncontested divorce or complete your divorce without the assistance of a lawyer you may still need a QDRO drafted to divide the plan assets. The Kielich Law Firm can assist you in drafting and filing the order. Contact my firm today to discuss your QDRO needs.
Dealing with QDRO Problems
Even minor problems with QDROs can spiral into major problems and major headaches for everybody involved. This often occurs because QDROs can be complex and few people understand them at the level necessary to deal with QDRO problems. The result is that lots of money and time gets wasted in court trying to figure out how to solve these problems. Although working with an experienced QDRO lawyer is no guarantee that the problems will melt away, working with an attorney experienced with QDRO issues can greatly improve the probability that your problems will be resolved in a more efficient manner. If you are dealing with a QDRO problem then you should contact my office right away so we can get started working on the problem before it can spiral out of control.