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Frequently Asked Questions in QDRO

Why do we need a QDRO?

Retirement benefits are generally non-assignable.  This means that a retirement plan cannot pay the benefit to anyone other than the employee.  For most retirement plans, there is an exception.  If a judge signs a QDRO (or similar court order) in a domestic relations case, and if that QDRO is approved by the Plan, benefits can be paid to someone other than the employee (like a former spouse).

My ex-spouse and I have agreed to the retirement division.  Do we still need a QDRO?

Yes.  For most employer-sponsored retirement, the payment of benefits to someone other than the employee does require a QDRO.

Why not cash in the retirement and pay my ex-spouse?

Taking a cash distribution of retirement can result in a significant tax liability.  The owner of the retirement incurs the tax liability.  The purpose of a QDRO is to transfer ownership (and the tax liability) to someone other than the employee.

My plan provides a model QDRO.  Why not just use the model?

Many plans provide a model QDRO.  Some models are written in a way to protect the employee.  Others are written in a way to make the transfer easier for the plan.  Unless you are an experienced attorney in these matters, it is not advisable to simply use the model provided by the plan.  The time and cost to “fix” a poorly drafted QDRO or one with unintended results, can be exponential.

Are all retirement plans divisible?

No. Some retirement plans are strictly non-divisible, regardless of any state court order.

Does an IRA require a QDRO?

No.  An IRA does not require a QDRO under the federal law.  However, on rare occasion the financial institution will refuse to transfer funds without a QDRO on file.  If that’s the case, it is usually more efficient to simply prepare the QDRO than debate the point with their legal department.

Can a QDRO be used for child support?

It depends on the kind of retirement in question.  Many retirement plans do allow a QDRO for child support payments.