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Retirement & Divorce: New Report Highlights What We Don’t Know

In August 2020, the U.S. Government Accountability Office (GAO) published a report on qualified domestic relations orders, or QDROs.  For those not familiar with what the GAO does, it’s an agency that responds to inquiries from members of Congress who want to know more about how federal tax dollars are being spent in order to improve operations of the federal government.

QDROs are a special court order divorced couples need to obtain in order to divide a company or union retirement benefit at divorce. Read our fact sheet on QDROs here. 

The QDRO process, as it exists, is complex and inefficient. Despite the fact that as many as half of U.S. marriages end in divorce, most Americans have never heard of a QDRO.  Many couples fail to address the retirement benefit at all during their divorce, even though retirement benefits are often the largest asset in a marriage other than a home.  This often disproportionately harms one of the spouses – usually the woman, if it’s an opposite-sex marriage – if that spouse earned significantly less retirement income than the other.

A lot of people who are legally entitled to a share of a former spouse’s retirement benefits pursuant to their divorce decrees never actually end up getting one because the QDRO process is so difficult to navigate.

Retirement plans and family law attorneys and judges also find the QDRO process difficult.  Having to review and deal with poorly drafted orders drives up administrative expenses for plans.  And family law professionals find themselves suddenly having to become experts on the federal private retirement law, which is outside their specialty.

In 2018 the Pension Rights Center launched an Initiative on Women and Retirement at Divorce to try to figure out what the problems are and start working with a wide array of partn­­ers to identify and implement solutions.  One big hurdle: data.  There is a ton about QDROs that we don’t know.  In fact, it seems that nobody knows because no one is researching it.

We are missing some very basic data about QDROs. How many QDROs are drafted in the U.S. each year? Of those, how many are actually submitted to a retirement plan?  How many are accepted and how many are rejected? Of the QDROs that are rejected, how many are actually resubmitted? How much retirement money is being left on the table every year because people aren’t getting the QDROs they need? This information seems straightforward, but no one is collecting it systematically.

Enter the GAO, and its report, titled DOL Could Better Inform Divorcing Parties About Dividing Savings.  The “DOL” here refers to the U.S. Department of Labor.

The GAO made a valiant effort to try to shed light on this issue, despite also confirming that there was very little data available on QDROs for it to work from.  GAO staff spoke to us, to QDRO drafters, to retirement plans, and to a number of other impacted stakeholders.  It was able to extrapolate some information through these anecdotal discussions and other data sources.  Perhaps the most important finding is that very few people obtain QDROs relative to the number of people who go through divorce.  This is a huge problem, because this means that a lot of people who are dependent on a spouse for retirement income are not getting a fair share of that retirement income if they divorce, even though they are entitled to a share under state law. 

GAO also found that members of historically disadvantaged groups are less likely to be availing themselves of the QDRO process than groups with privilege, though it attributes this to the fact that disadvantaged groups are less likely to have earned benefits under a retirement plan in the first place.  GAO also confirmed that individuals with low-income are less likely to be able to access resources necessary to navigate the QDRO process.

But GAO isn’t responsible for regulating retirement plans.  GAO ultimately found that the Department of Labor, which is charged with overseeing disclosures and reporting from retirement plans, could be doing a lot more to collect important information about QDROs from retirement plans.  The Department already collects substantial amounts of information from retirement plans nationwide.  This data just doesn’t include anything on QDROs.  GAO also found that the Department could be doing more to increase public awareness about QDROs and the QDRO process.

We agree that the Department of Labor collecting and making public more information about the nation’s QDROs would be extremely helpful toward our goal of making the QDRO process easier for everyone involved. We look forward to working with the Department, especially as our Initiative on Women and Retirement at Divorce continues to move forward.  If you want to know more,  we recommend checking out the GAO’s report here. It is a long but worthwhile read.

They say that the first step to solving any problem is acknowledging you have one.  The GAO’s report is a very important first step.

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