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.
