What is a QDRO? Divorce and retirement

Whether you are young with a retirement account or you are divorcing in the age of retirement, you may have heard of a QDRO. This acronym stands for a Qualified Domestic Relations Order and will impact how your retirement accounts are divided at the time of divorce. The QDRO allows an alternate payee, including a spouse, ex-spouse, child, or another dependent to collect money from your retirement account.

1) What qualifies as a QDRO? A QDRO is a court-issued judgment that formally approves a property settlement agreement involving a retirement plan.

2) What does a QDRO need to contain? The QDRO must have the name and last known mailing address of the participant and each alternate payee, the name of each plan to which the order applies, the amount or percentage, or method of calculating the amount or percentage paid to alternate payee, and the number of payments covered by QDRO.

3) How does a QDRO work? The QDRO will describe how the retirement assets will be divided.

4) Is a QDRO required? Yes, it is required for any retirement plan covered by ERISA (the Employee Retirement Income Security Act.)

5) Who can approve the QDRO? The QDRO must be approved by the plan’s administrator, provided it meets requirements. Transfers do not incur an early-withdrawal penalty.

6) How does a QDRO get drafted? Plan administrators may provide forms to participants, however there are many legal requirements so most QDROs should be completed with the assistance of an attorney.

Source: Reuters, “What Is a QDRO? How Divorce Affects Retirement,” Andrew Chow JD, April 19, 2012.