|Retirement (Photo Credit)|
The following is a common scenario involving the QDRO:
- A settlement agreement states that retirement assets will be equally divided between the husband and wife.
- Three months later with a QDRO in hand, the couple finds out that the 401(k) has gone down in value and the non-qualified pension plan can’t be divided.
- At this point, it’s necessary to determine the plan’s official division date and whether or not equivalent assets, temporary benefits, or cost of living adjustments in the plan were considered in the divorce decree.
What Qualifies as a QDRO? In general, a QDRO is a court-issued judgment, order, or decree that formally approves a property-settlement agreement that involves a retirement plan.
What Must be Included in the Order? A QDRO must contain the following information:
- The name and last known mailing address of the participant, and each alternate payee;
- The name of each plan to which the order applies;
- The amount or percentage, or method for calculating the amount or percentage, to be paid to the alternate payee;
- The number of payments, or time period, covered by the QDRO.
Are QDROs Required During Divorce? Yes, a QDRO is required for any retirement plan covered by ERISA, the Employee Retirement Income Security Act.
Does a QDRO Need Approval? Yes, the QDRO must be approved by an administrator and it must meet certain requirements.
Are There Early-withdrawal Penalties? No, QDRO transfers from a retirement account do not incur any early-withdrawal penalties