In order to receive retirement benefits that have been awarded in a divorce, it is important to obtain a court order, which tells retirement plans how to divide and pay benefits to the divorced couple. For private retirement plans, these court orders are called Qualified Domestic Relations Orders or QDROs. Other retirement systems call them Domestic Relations Orders or DROs.
The court order must be submitted to the retirement plan to ensure that the plan pays benefits to a former spouse correctly. Make sure to keep a copy of the order for your records. Some state, city, county, and town retirement plans will not make direct payments to former spouses. Read our fact sheet to learn more about state retirement systems and divorce.
Although the Pension Protection Act of 2006 requires that private pension plans must accept court orders regardless of when they were issued, it is best to submit a court order to a retirement plan as soon as it is issued by the divorce court, even if retirement is many years away. We’ve heard sad stories in which the retirement plan received a court order after the pension had already been distributed.
Also, you don’t want to end up in a situation where one of the parties in the divorce dies before the plan has been notified how it should divide the benefits. Read our summary of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan to see how complicated things can get when divorced couples don’t make it clear what should be done with their retirement plans.
Tomorrow’s blog entry will focus on the importance of a pension or retirement plan as a marital asset.
Read the rest of the blog entries in this series: