What You Need To Know About Dividing Retirement Benefits at Divorce
Retirement benefits earned through a company’s retirement plan, such as a pension or 401(k) plan, can be one of the largest financial assets in a marriage. However, retirement benefits are often overlooked during divorce, in part because divorce is complicated and stressful and the spouse just wants to get it done quickly; but also, because a divorce can occur decades before retirement and the divorced spouse often doesn’t even know to ask about retirement benefits.
In order to divide retirement benefits in a divorce, you or your spouse need to obtain a “qualified domestic relations order,” generally referred to as a QDRO.
So, in reading this fact sheet, if you only remember one thing pertaining to getting retirement benefits at divorce, remember this word: QDRO!
What is a QDRO?
In short, a QDRO is a legal instrument that grants a person the right to a portion of the retirement benefits their former spouse has earned through participation in a private sector employer-sponsored retirement plan.
Without a QDRO to divide retirement benefits, people going through divorce may lose their rights to a share of those benefits and put themselves at risk of economic insecurity when they reach retirement age.
The first step to getting a QDRO is to obtain an order from a state court describing how a plan should divide a retirement benefit.
You (or your attorney) then send the state court order to the retirement plan to ensure that this order satisfies various legal requirements and is accepted by the plan. (As a technical matter, this court order is first called a “domestic relations order or DRO and once a plan approves it, it becomes a QDRO. But for simplicity’s sake, a QDRO is the key word you need to know).
QDROs are generally prepared during divorce proceedings, but they can be prepared and filed years after divorce. However, a delayed QDRO can often result in loss of a spouse’s rights.
In a QDRO, the person who earned the benefit is called the “participant,” and the person who is designated to receive a share of that benefit is called the “alternate payee.”
QDROs can award benefits to the alternate payee while the participant is alive, as well as survivor benefits if the participant dies.
Why do I need a QDRO?
As part of the divorce, the divorce court judge or the property settlement agreement may have said that the retirement benefits were to be divided. However, federal law doesn’t allow a pension or retirement plan to pay a share of the benefits to a former spouse unless there’s also a QDRO. The QDRO is usually a separate court order from the divorce decree, but can also be part of it.
While it’s sometimes possible to obtain a QDRO long after the divorce decree is issued, it’s almost always better to request a QDRO as quickly as possible.
If the benefit-earning spouse (participant) retires after the divorce is final and no QDRO has been approved by the plan, the plan will begin paying the benefit out to the participant, meaning the former spouse could lose out completely.
If the plan approves a QDRO after payments to the participant have begun, the plan will honor the QDRO, but only future payments will be affected, and the former spouse may have lost a portion of their interest in the previously paid portion of the retirement benefit.
Likewise, if the participant dies or remarries before there is a QDRO, there may be no benefit left to divide.
We’ve heard from many former spouses who believe they’re entitled to a portion of a retirement benefit because it was addressed in the divorce decree. We have to tell them that, unfortunately, unless the retirement plan has qualified the state court order, making the order a QDRO, the plan won’t pay them a benefit.
How do I obtain a QDRO?
Find an attorney
If you’re in the midst of a divorce and are already working with a family law attorney, make sure your attorney knows that retirement assets are at stake and that a QDRO will be needed.
Notify the court
If you are representing yourself without an attorney, make sure the court knows that your spouse earned a retirement benefit and ensures that your former spouse provides all information the court needs to properly divide the benefit.
Contact the plan
If your spouse hasn’t been forthcoming with information about their retirement benefits, or if your divorce has already been finalized without a QDRO, contact the plan directly to begin the process of obtaining a QDRO and ask for the documents listed below.
Once you have the plan administrator’s contact information, contact them in writing and ask for the following documents:
- Participant’s benefit statements
- A copy of the plan’s model QDRO, if it has one
- A copy of the plan’s QDRO procedures
- A copy of any QDRO that may already be on file for the participant
If you need them, you can also request a copy of the Plan’s “Plan document” and “Summary Plan Description.”
What should a QDRO include?
There are nearly 700,000 private retirement plans in the United States, and each one has its own rules for what information must be included in a QDRO. However, there are basic elements that the federal law requires that each QDRO must contain. We’ve listed these requirements below.It’s important to know that plans can require additional information. If the participant is covered by more than one retirement plan (for example, if the participant has benefits under both a defined benefit pension plan and a 401(k) plan from one or more employer), you’ll usually need a separate QDRO for each plan. All QDROs must include the following:
- The name and last known mailing address of the participant and former spouse (the alternate payee);
- The name of the plan to which the order applies;
- The dollar amount or percentage (or the method of determining the amount or percentage) of the benefit to be paid to the alternate payee; and
- The number of payments or time period to which the order applies.
The QDRO may have additional details, depending on the length of the marriage and the type of plan, that can make ensuring that the QDRO accurately reflects the property division even more complicated.For this reason, it is recommended that an attorney be involved to draft the QDRO.
What if I have problems?
- Contact the Pension Rights Center or a Pension Counseling and Information Project. While a counseling project may not be able to draft a QDRO for you, it can help you obtain the necessary documents and inform you of your rights. Retirement plans are required to provide information related to QDROs to all people who may be entitled to a benefit from a retirement plan, including divorcing spouses.
- If your area is not served by a pension counseling project, use PensionHelp America, an online service of the Pension Rights Center, to find a legal services office or nonprofit organization to assist you.
Other resources that may be able to help are your local bar association or the National Pension Lawyers Network.
What should I do once I have a draft QDRO?
If time permits, it’s always a good idea to ask the plan administrator to review a draft of the court order before it’s sent to the court for signing, although this is not required. The plan administrator should let you know within a reasonable amount of time whether it would accept the court order as drafted, making it a binding QDRO once it is signed by the state court judge and then submitted to and formally accepted by the plan.
What should I do once the state court order is signed by the judge?
You or your attorney should get a copy of the order from the court clerk’s office (usually a “Certified” copy) and send it to the plan administrator. During the period of time it takes for the plan to evaluate and accept the order, it will take steps to protect the benefit that would be payable to the alternate payee.
If the plan finds that the court order does not meet the requirements for a QDRO, the plan must provide a clear explanation for the rejection, including information on what you need to do in order to make the order acceptable to the plan.
Is there anything I should do before I request my QDRO?
If you think you need to protect your interest in your spouse’s retirement benefit, consider notifying the plan that you may be initiating the QDRO process. If you’re separated from your spouse, you or your attorney should consider informing the plan of the date of separation and that a DRO could be forthcoming to the plan for qualification as a QDRO.
If you’re in a divorce proceeding, notify the plan of that fact and that a QDRO is being drafted. These steps could put the plan on notice to be on the watch for actions taken by the participant to empty the retirement account, transfer it without your knowledge, or take other actions that could deprive you of your interest in the retirement benefit.
Additional Resources
- DOL Publication: QDROs: the Division of Retirement Benefits through Qualified Domestic Relations Orders
- Retirement Roadmap: When Your Family Status Changes
- PRC Fact Sheet: State Retirement Plans and Divorce
