Everything You Need To Know About QDRO’s

What is a QDRO?


QDRO stands for Qualified Domestic Relations Order. The simplest way to describe it is as a legal document that splits up the funds in an ERISA (Employee Retirement Income Security Act) qualified retirement account. It is filed with the court as a part of a divorce or separation agreement stating that one spouse gets a pre-determined percentage of their ex-spouse’s retirement plan assets. One thing to note, if you choose to split retirement assets without a QDRO, the account holder is still responsible for taxes on the assets transferred. If you have a QDRO, your former spouse is then responsible for taxes once the funds are transferred.


Can a QDRO be reversed?


If you decide you’ve changed your mind about wanting a QDRO but it has already been received and processed, it is nearly impossible to reverse. The only way to have it changed is if the courts and the administrator agree that the QDRO goes against your divorce agreement and needs to be modified. If there is a misalignment, you might have to go back to your ex-spouse and re-negotiate in order to get the QDRO amended.


Do You Need One?


It is a good idea for anyone with retirement plan assets going through a divorce or separation to have a QDRO. In many cases, issues related to QDRO’s are overlooked and left unresolved, so it is important to speak with an experienced attorney about your retirement accounts to ensure you have a QDRO in place if necessary and that you’ve cover everything correctly in your divorce agreement.  Not many attorneys draft QDRO’s, but Divorce Matters attorney Ashley Balicki is skilled in drafting QDRO’s specifically. If you would like to speak with Ashley or any of our other experienced attorneys about your situation, contact Divorce Matters today or call us at (720) 542-6142.

What is a QDRO?

QDRO stands for (Qualified Domestic Relations Order). This is an Order that can be issued by the Court in a domestic case to transfer funds from one ERISA qualified retirement account to another without any of the normal penalties. The most common accounts that are divided pursuant to a QDRO are 401(k), 403(b), and pensions. IRAs do not need to be divided with a QDRO.

Important facts:

  • A QDRO needs to be drafted and filed with the Court so that a judge can sign it before any accounts can be divided.
  • While not many attorneys in Colorado draft QDROs, this is a service that I provide. I work with the Plan Administrator to get a QDRO drafted and pre-approved before sending it to the Court to streamline the process.
  • There are no penalties involved when funds are transferred through a QDRO as they normally would be for any other type of withdrawal or transfer.
  • There are no tax implications when funds are transferred from one retirement account to another through a QDRO. However, if a lump sum cash payout is taken then the party receiving same generally has to pay income taxes on it.
  • Any Permanent Order or Separation Agreement needs to specify whether any accounts are to be divided pursuant to a QDRO and have specific language regarding how such accounts are to be divided.
  • A QDRO can also sometime be used to obtain past due child support.

If you have questions about QDROs, please feel free to contact me here.