In a nutshell, a QDRO is an acronym for Qualified Domestic Relations Order. A QDRO is used to divide a retirement account into two separate accounts, following a divorce (or some other type of legal judgment).
So for example, let’s say Party A has a General Motors 401K Savings Plan. Even though Party B has never worked at General Motors, after the judge signs the QDRO, then they will both have GM 401K plans, even though one of them never worked there.
From there, each party can do what they want. They can cash out the retirement plan and take a tax hit; they can roll it over into their own 401K; or they can do nothing and keep the retirement account in place.
It’s just that simple. We prepare it and then both parties sign the document. Then we file the document at court.
The judge will sign it and mail it to our client. Once our client receives the document, they will send it to the QDRO administrator.
That’s pretty much it!
If a judge orders that a retirement is supposed to be divided– and one person is not cooperating– that person is in Contempt of Court. At that point, you could file a Petition for Enforcement and serve your ex. You could bring the QDRO with you to the Enforcement hearing. The judge will likely have them sign it on the spot!
Here’s The Government Definition: (Source)
A “qualified domestic relation order” (QDRO) is a domestic relations order that creates or recognizes the existence of an “alternate payee’s” right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and that includes certain information and meets certain other requirements.
Reference: ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)
What is a “domestic relations order?”
To be recognized as a QDRO, an order must be a ‘domestic relations order. A domestic relations order is a judgment, decree, or order (including the approval of a property settlement) that is made pursuant to state domestic relations law (including community property law) and that relates to the provision of child support, alimony payments, or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of a participant.
A state authority, generally a court, must actually issue a judgment, order, or decree or otherwise formally approve a property settlement agreement before it can be a “domestic relations order” under ERISA.
The mere fact that a property settlement is agreed to and signed by the parties will not, in and of itself, cause the agreement to be a domestic relations order.
There is no requirement that both parties to a marital proceeding sign or otherwise endorse or approve an order. It is also not necessary that the retirement plan be brought into state court or made a party to a domestic relations proceeding for an order issued in that proceeding to be a “domestic relations order” or a “qualified domestic relations order.”
Indeed, because state law is generally preempted to the extent that it relates to retirement plans, the Department takes the position that retirement plans cannot be joined as a party in a domestic relations proceeding pursuant to state law. Moreover, retirement plans are neither permitted nor required to follow the terms of domestic relations orders purporting to assign retirement
benefits unless they are QDROs.
Must a “domestic relations order” be issued by a state court?
No. A domestic relations order may be issued by any state agency or instrumentality with the authority to issue judgments, decrees, or orders, or to approve property settlement agreements, pursuant to state
domestic relations law (including community property law).
Reference: ERISA § 206(d)(3)(B)(ii); IRC § 414(p)(1)(B); Advisory Opinion