What is a “QDRO”?
A “QDRO” is a Qualified Domestic Relations Order.
What is a “Domestic Relations Order”?
A Domestic Relations Order (“DRO”) is a legal order, often as part of a divorce decree that splits and/or changes ownership of a retirement plan to give the divorced spouse their share of the assets in the retirement plan.
Who can benefit from a QDRO?
A QDRO may grant ownership in the participant’s pension plan to an Alternate Payee, who must be a spouse, former spouse, child or other dependent of the participant.
What kinds of benefits can be provided in a QDRO?
A QDRO may provide for marital or community property division between the participant and the Alternate Payee, or for the payment of alimony or child support to the alternate payee.
Do QDROs apply to all pension plans?
No, QDROs apply only to employee benefit or pension plans subject to ERISA, the Employee Retirement Income Security Act. Comparable types of orders are applicable to Federal civil service retirement plans, and for state, county and municipal retirement plans in most states.
A Participant is divorcing, what do I do?
At such time as the Plan Sponsor is on notice (verbal or written) regarding a pending divorce and reasonably believes that the Participant’s account may become subject to a QDRO, the Plan Sponsor may suspend processing any distribution or loan requests pending resolution.
I have a DRO in hand, what do I do now?
Not every DRO is a QDRO. You must review your QDRO Procedure and Checklist and determine if the DRO is indeed “Qualified”. There are technical requirements that the DRO must meet to be considered a QDRO. Your QDRO Checklist/Procedure lays out steps that should be taken throughout the process and may include timelines to be followed.
Once you have determined whether the DRO is a QDRO you must notify both the Participant and the Alternate Payee of such determination.
If you have a QDRO then the next step is to obtain the proper authorization and/or election to segregate and/or distribute the separate benefit to the Alternate Payee according to the terms of the QDRO and the plan document.
If you have determined that the DRO is not qualified, then you must send a copy of your QDRO Checklist to both the Participant and the Alternate Payee. They may choose to make corrections to the DRO and resubmit it; at that time the process begins anew.
More information can be found on the DOL website (below):
http://www.dol.gov/ebsa/faqs/faq_qdro.html
http://www.dol.gov/ebsa/publications/qdros.html
Sheri is a Consulting Enrolled Actuary with Pinnacle Plan Design, LLC 