If you and your spouse are considering, or are in the process of divorce, and one or both of you has a corporate benefits or civil service, 401(k) savings and/or pension plan, part of the division of marital assets will likely involve the drafting of a QDRO, or Qualified Domestic Relations Order.
QDROs are documents mandated by federal law under ERISA (Employee Retirement Income Security Act) which gives guidance on protecting the “alternate payee," which is you if you are the non-employee spouse.
QDROs are typically the last item to be developed once the divorcing couple have completed a mediated settlement agreement. These documents can be tricky to draft and should be carefully developed and reviewed by you, your divorce attorney and your financial advisor for accuracy and consistency before signing and submitting to the employing organization.
Often, someone in your attorney's office may work on drafting your QDRO, or it could be outsourced to a specialty firm by your attorney. Each QDRO must meet the requirements of each spouse's employer, be it corporate or civil service. Make sure wording in the QDRO is consistent with any specifics outlined in your mediated settlement agreement and/or divorce decree documents with regard to the division of financial assets in the above described plans.
ERISA requires that a plan provide to the divorcing couple and their attorneys, four documents useful in reviewing a QDRO. They are:
• The text of the plan
• Summary Plan Description
• The Plan’s Written QDRO Procedures
• Annual benefit statement
Divorcing couples should focus on the Summary Plan Description which provides the most important features of the plan document in easier-to-understand language. It contains a comprehensive description of the rights and duties of beneficiaries and participants. Be sure to read the section outlining "rules for QDROs, divorce and survivorship."
The Plan's Written QDRO Procedures document also is very important for guidance on the proper drafting of the document, along with a sample QDRO from the company. To secure a copy of the QDRO procedures, a phone call request to the employer's Plan Administrator, typically in the Human Resources department, should suffice. My advice would be to get copies of these documents early in the divorce process. The Plan Procedures will include a complete checklist of plan requirements for approving a QDRO, and the steps necessary for expedience.
If you are the "alternate payee," these documents should be formally requested by your divorce attorney as part of the discovery process.
This article is intended to be a general guide or overview of QDROs. While not comprehensive, it provides valuable guidance in a very complicated and structured area of divorce. The next article in this series covers information regarding the specifics of civil service pensions and QDROs.
For more information about QDROs and pensions with regard to divorce, please visit http://www.lifetimeplanning.cc/advanced_search_result.php?keywords=QDROs.... Also see http://en.wikipedia.org/wiki/QDRO.
Join Patricia Barrett at her upcoming 2013 Houston Leisure Learning classes on September 29 and November 11. She will also be presenting at the Guide to Good Divorce seminars in Houston on September 28. For more information on divorce financial planning or divorce mediation, visit Patricia's website, Lifetime Planning.