Qualified Domestic Relations Order
A Qualified Domestic Relations Order (QDRO) may well be your most treasured document if you are to take a part of your spouse’s retirement plan either by settlement or court decision. However, Qualified Domestic Relations Orders aren’t needed and aren’t even available for certain deferred compensation plans.
You won’t need a QDRO, for example, if no retirement benefits were earned during the marriage. You won’t need one if each of you retains every retirement interest that already exists in your respective names; simply waive in writing any claim to your spouse’s plan.
But when you “take” or are awarded your half of the marital property interest in your spouse’s plan as a retirement benefit for yourself, do it with a QDRO. By using a QDRO you’ll receive your benefit directly, helping you both you in the long run by freeing your spouse from dividing the benefit and also by accounting for tax on both shares. You’ll have direct and enforceable rights to your interest in the plan. A QDRO gives you as many rights to your interest as your ex-spouse has to his or her interest.
The federal law behind QDROs includes procedural requirements that ease the burden on retirement plan administrators. Recall that the administrator was joined as the plan’s agent in Chapter Seven. The names, addresses, social security numbers and beneficiaries for you and your spouse are usually listed first in the QDRO. If your address changes, you must notify the administrator. Your interest is defined, most likely by using the time rule discussed in Chapter Thirteen, as your pro rata share of the benefit.
The administrator must approve the QDRO before it is submitted to the court. The plan is not required to do anything for you that it wouldn’t have to do for your spouse. When approved, however, you have your own retirement plan with as much control and as many choices as your ex-spouse, the employee member of the plan.
Your independent right under a QDRO is powerful. Perhaps your ex-spouse decides to work beyond retirement age, although you’re ready to retire. You’re wrong if you think you can’t quit because you won’t have enough money to live on without your benefits from your interest in your spouse’s plan. The plan is obligated to pay you when your ex-spouse is eligible for retirement, whether or not he or she actually retires. Your benefit will be less while your ex-spouse is working, based only on your share of your ex-spouse’s contributions already accumulated. Write to the plan administrator to find out what the benefit would be. That is another important right.
You also will be able to choose from the same benefit options and make the same elections under the plan as your spouse. You are entitled to a statement showing what you would receive under each of the options. There are restrictions, however, on how often the administrator can be asked to make these calculations.
Your attorney may be able to add provisions to your QDRO to protect you against known risks of this particular plan. For example, the plan may allow members to borrow against accumulated benefits. If its rules do not require the plan to establish a separate account in your name, you need an order keeping your ex-spouse from using your monetary interest in the plan as his or her collateral. Every plan must be reviewed, by your attorney and often by a pension specialist, for potential problems.