What is a Qualified Domestic Relations Order (QDRO) and How Does It Impact My Retirement Assets?


Asset division in divorce is often a tough nut to crack. You want to move on with your life and also want what is best for your family. Depending on factors such as your and your former spouse’s income and wealth, family structure, and assets held jointly, you might be putting together a QDRO (Qualified Domestic Relations Order.)

QDROs are decrees that apply expressly to retirement assets such as IRAs and 401(k) plans. QDROs can force your retirement assets to pay child support, alimony, or support for any other dependents that you and your former spouse bore responsibility for, such as a parent or sibling. There can be incredibly costly mistakes in QDRO drafting that can either short-change your child from the support they should be receiving, or take away funds you will need in retirement age. This is because QDROs are subject to the provisions of both the Internal Revenue Code (tax law) as well as ERISA (Employee Retirement Income Security Act of 1974.)  It is extremely important to have the benefit of counsel from an experienced family law attorney when trying to divide assets during a divorce in order to avoid these costly mistakes.

Divorcing couples who are employing QDROs often only think of the numerous and complex tax implications that come with prematurely cashing out retirement assets. However, there are pitfalls with QDROs that are not just financial, and can impact more than your tax bill. While QDROs are sometimes part of the divorce process and therefore part of family law, it’s actually employee benefit laws that apply to them. Because every retirement plan is subject to different terms, the “qualified” part of QDRO is actually determined by the plan administrator- not a judge. If the plan administrator does not think that your relationship with the beneficiary fits their definition of “qualified” or they disagree with the amount to be paid, you will have to negotiate with them or go to court. What makes this process additionally challenging is that family court judges that preside over child support and alimony hearings may not be familiar with the employee benefit laws that apply to QDROs, which can hurt spouses trying to honor their payments but are stopped by plan administrators.

An attorney can help you with divorce asset division and prevent you from falling into an expensive trap that will hurt both you and your dependents. By analyzing the terms of your retirement plans and negotiating with plan administrators, they can help prevent you from accidentally violating the terms of your retirement plan and having to make a trip to family court. Just because a plan administrator may be satisfied with an initial QDRO, it may not carry out the intent of all parties that were specified in the divorce decree or separate maintenance agreement.

If you are facing a divorce, you most certainly will be dividing assets and property.  It is imperative to retain an experienced property division attorney to make sure your rights are protected and nothing is missed that could cause you financial burdens down the road.   The attorneys at Orsinger, Nelson, Downing and Anderson, LLP will aggressively fight to protect your interest in all matters during your divorce.  Contact us today for a confidential consultation.