What is a QDRO in a Texas divorce? Fort Worth divorce attorney explains
QDRO stands for Qualified Domestic Relations Order. There are two components to a QDRO. One is the domestic relations order and the second is the qualification. A domestic relations order is an order issued by a state judge under the state’s domestic relations law. These orders are typically part of the property settlement following a divorce. It assigns a property interest belonging to one person to an alternate payee. The two most common alternate payees are former spouses and children, who receive the order for child support. QDROs are complex orders. If you need a QDRO in your divorce you should consider hiring a Dallas or Fort Worth divorce attorney.
QDRO requirements under federal law
When a court issues a DRO for an employee benefit covered by ERISA, the plan administrator must qualify it before any segregation can occur. To qualify the order, it must satisfy ERISA requirements and conform to plan rules. The DRO must identify the participant, the alternate payee, the plan, the time period for which it applies and the dollar amount or percentage (along with the formula used to calculate the percentage) of benefit divided.
The order is sent to the plan administrator who must review the order and either qualify it or reject it for failing to satisfy ERISA and/or the plan. This process can take as much as eighteen months by law. Once a DRO is qualified and becomes a QDRO then the plan administrator must segregate the benefits and give the alternate payee access to his or her newly segregated benefits as required by the order. Divorce lawyers in Fort Worth help clients resolve QDRO issues in divorces.
Limitations of a QDRO in Texas
The most important part of the DRO is how it follows plan rules. A DRO cannot create new benefits or increase benefits for either the participant or the alternate payee. It cannot change rules or create different vesting or distribution schedules. The divorce lawyer must draft the DRO for the benefit of the alternate payee. It needs to contemplate future actions based upon the benefits accrued during the stated time period in the order. The problem with many do-it-yourself DRO forms or forms provided by benefit service providers is that they are generic. They do not contemplate unique needs of alternate payees or unique situations caused by quirky plan rules.
Problems qualifying a QDRO used in a divorce in Fort Worth, Dallas and Bedford
Two common reasons for DROs not to be qualified are: 1. Failing to provide necessary information; and 2. Failing to conform to plan rules. Often DROs arrive in a plan administrator’s mailbox with no identification for the plan, missing information for the participant or alternate payee, lacks the applicable dates for segregation, or lacks the appropriate description for how to segregate the benefit. This is a silly problem but one that can result in months of delay in completing segregation. Even more of a problem is when the DRO arrives and the plan cannot qualify it. For example, the DRO may state that the alternate payee should receive half the benefit, payable immediately.
If the plan does not permit distribution until age sixty-five then it cannot be qualified because it changes the distribution schedule for the plan. A second order may arrive that states the alternate payee should receive half the benefit payable at age sixty-five and then be rejected again because it does not state whether it is the participant’s age or the alternate payee’s age. Alternatively, it may not be rejected but without specification the alternate payee could be stuck waiting for the participant to turn sixty-five without recourse.