QDRO – Qualified Domestic Relations Order
A QDRO is an order that needs to be included in a divorce settlement agreement when dealing with pension funds. The QDRO establishes your ex-spouse’s legal right to receive a designated percentage of your qualified plan account balance or benefit payments.
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A Qualified Domestic Relations Order (QDRO) is a judgment, decree or order for the division of retirement savings plans, pensions, 401(k)s or other retirement accounts.
A QDRO would be needed in a divorce proceeding where there is a retirement savings plan, a pension, a 401(k) or any other retirement account that needs to be equitably distributed between the husband and wife. A QDRO separates the portion of the retirement account that is awarded to the non-owner spouse. This portion will be transferred to another qualified account in the non-owner spouse’s name.
Sometimes there is a non-marital portion of a retirement account, because the account existed prior to the marriage of the parties. The expert hired will first determine the non-marital portion of the account, and then divide the remainder of the account between the parties according to the Final Judgment or Order entered.
The date of the valuation of the account is determined either by the parties’ agreement or a court order. Typical dates are: date of separation; date of filing the dissolution petition; date of signing a marital settlement agreement or date of final judgment. Any possible increases or decreases to the account after the date of valuation are calculated and reflected in the amount each party receives once the account is divided.
This Order is normally drawn up by an individual who specializes in the preparation of this document.
Once the QDRO has been approved by the company administering the retirement account, it is sent to the judge for signature. Once the judge signs the order it is sent to the plan administrator and the funds are divided.
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