Qualified Domestic Relations Orders
| Publication year | 2023 |
| Pages | 28 |
Steps to Take and Avoid when Drafting Family court Agreements and Court Orders Which Divide Pensions and Other Retirement Plans Between Divorcing Spouses
By Michael P. O'Connell
When a Family Court judge issues an order after a trial or issues an order which approves an agreement between divorcing spouses, either of which includes a division of retirement plans, the parties need supplemental orders, commonly referred to as Qualified Domestic Relations Orders (QDROs). When the retirement plan custodian receives a properly executed QDRO, he/she divides the retirement between the divorcing spouses based on the QDRO. The purpose of a QDRO is so the named owner of the retirement will not have to pay income taxes on the portion of the retirement to be transferred and the recipient only has to pay income taxes when money is withdrawn from the plan Family Court judges have subject matter jurisdiction to sign QDROs, which will be honored by business entities, state governments and federal retirement plans (including military retirements) as long as the seal of the Clerk of Court is on the signed QDRO.
I am the owner of QDRO Solutions LLC and regularly practice in the family court. QDRO Solutions drafts QDROs for people all over this country. The purpose of this article is to provide basic guidance to family law practitioners when they are drafting final orders which divide retirements between divorcing spouses.
Before getting into the discussion, it is important to define some terms that will be used in this article:
A. Final Order: Court Order after a trial or which approves a settlement agreement as the court's order (hereinafter "final order").
B. Plan Administrator and Plan Custodian: The entities which administer the retirement plans and issue periodic statements which show the value of the plan (hereafter "custodian").
C. Participant: The owner of the retirement plan to be divided between divorcing spouses.
D. Alternate Payee: The spouse who is to receive some or all of a retirement plan (hereafter "AP").
E. Defined Contribution Plan: A retirement fund such as an IRA, 401k, or a Thrift Savings Plan for federal government employees.
F. Defined Benefit Plans: Ones which provide monthly pension payments to a retired employee after the employee retires from a governmental entity or private business entity. These plans require an employee to work a minimum number of years before they can retire and begin getting these monthly payments. If a Participant leaves employment before they have worked the minimum number of years necessary for retirement, he/ she can take the vested portion of the retirement fund...
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