Retirement plans such as 401(k)'s, defined benefit pension plans, and other hybrid employer sponsored retirement savings vehicles are often among the largest assets to be divided during the division of a martial estate. Many of these plans are governed by a set of federal law known as the Employee Retirement Income Security Act of 1974 or ERISA.

ERISA allows an Alternate Payee such as a former spouse to receive a portion of the employee's benefits with a court order. A Qualified Domestic Relations Order (QDRO) is the court order required to give notice to a retirement plan administrator that an Alternate Payee is entitled to a portion of the plan. Without a QDRO the plan administrator cannot legally make payments to the Alternate Payee.

Who Should Draft My QDRO ?

Drafting of QDRO's is an important step in the divorce financial planning process. Financial planners have specific and far reaching knowledge of retirement plans and the underlying laws that govern them but are ill-equipped for drafting the actual Domestic Relations Orders. The drafting process is best left to a professional specializing in drafting such documents. These professionals often have experience working for the large plan administrators and have inside knowledge of the processes.

For a QDRO to be valid and accepted by both the court and the plan administrator it must contain specific requirements under the law as well as be tailored to that specific plan. Retirement plans may even reject court certified orders that were not pre-approved by their own staff. For this reason it is necessary for a draft to be sent to the plan administrator for pre-approval prior to seeking court certification.

How Will a Financial Planner Help Me ?

Divorce financial planning will help each party to understand the process and be sure their rights are protected in the draft documents. The alternate payee and plan participant will need to consider their options for managing benefits from a defined contribution plan. Benefits should be invested in securities in order to earn returns. Tolerance for risk and time horizons may have changed for both parties and re-visiting these topics is vital to post divorce success. It may be worth discussing the options for distribution of benefits from a plan should cash be needed at the time of the division. It is also vital to understand the lump sum, annuity, and other options available for benefits under a defined benefit plan. These are ideal topics to pursue in discussions with your financial advisor during the divorce financial planning process.

The QDRO process can take many months to complete, however in many cases we have completed the QDRO Process in few weeks. For more details contact our QDRO Consultant at (734) 425-1074 or to get started click the link below to provide us with the information we'll need to begin.

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DISCLAIMER: This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.