QDRO - What is a it? A QDRO (Qualified Domestic Relations Order) is court order that assigns to an alternate payee the right to receive all or a portion of the benefits that were payable to the employee participant under the participants retirement plan.
A QDRO is simply a type of order entered in a divorce proceeding or other domestic relations proceeding. The terms of the QDRO must be recorded in the Judgment for Dissolution of marriage or some other court order. The QDRO creates an alternate payee’s right to receive all or a portion of retirement benefits that otherwise would have gone to the employee. A properly written QDRO describes how the assets of a pension plan are to be divided, and what happens when the parties die. That means that the QDRO defines the survivor’s benefits that are paid to a nonemployee.
It is important to remember if a QDRO fails to cover all of the community retirement assets, those assets may not be able to be received later.
QDRO's and the rules governing them are complex and constantly changing. There are a wide variety of retirement and pension plans and each has unique requirements and features. A QDRO must be drafted to meet specific legal criteria and tailored to the particular type of plan it’s supposed to divide. Using a generalized approach to creating a QDRO can easily result in an improper division of benefits and the loss of important rights under a plan as well as a total or partial loss of benefits to a participant.
QDRO's are federally mandated orders, which are needed at the end of a Family Court dissolution or divorce to accomplish the division, between divorcing parties of various retirement and pension plans, which were accrued during the marriage. QDRO’s can also, in certain less usual circumstances, pay for alimony and child support.
QDRO's are prepared from the judgment of divorce and then they are reviewed by plan administrators for compliance with the terms of the plan and with ERISA (Employee Retirement Income Security Act) or other applicable laws. The QDRO may be a separate document or it may be part of a divorce decree, and is valid as long as it meets the standards for a Qualified Domestic Relations Order under ERISA and meets the standards of the plan to which it applies. Courts have jurisdiction to declare a QDRO "qualified" as comporting with federal law, but pension plan administrators must determine whether a QDRO meets the requirements of a specific pension plan.