Important Things You Need To Know About QDRO

The QDRO (Qualified Domestic Relations Order) is a legal order recognizing an alternate payee to receive all or part of participant’s qualified pension plan. The QDRO is mostly used to give support to an alternate payee or divide martial property during a divorce proceeding. An alternate payee could be a spouse, ex-spouse, child or other dependent of the participant. The QDRO splits and changes ownership of a retirement plan to give the alternate payee their share of the asset or pension plan. It can be used to pay for child support or alimony.

Here are some of the rules that apply to QDROs:

  • A QDRO must meet certain rules under federal law in order for it to be valid.
  • A QDRO should contain the name and mailing address of the participant and the alternate payee; formal name of the plan covered; and the amount or percentage of the participant’s benefits to be paid to each alternate payee.
  • You only require a qualified domestic relations order if you’re splitting a retirement plan. If you keep yours and your spouse keep theirs, no QDRO is needed.
  • If alternate payee is a spouse or ex-spouse, the benefit under a QDRO will be taxable to them. If the alternate payee is someone other than the spouse of the plan participant (for instance a child), the participant will pay the tax on the payments.
  • Your QDRO usually won’t give you rights to anything your ex-spouse puts into their plan after the divorce.

A QDRO mainly caters  to legal separation, marital dissolution, or family support obligation and hence, any domestic relations order that provides for child support or recognizes marital property rights may be a QDRO, without the divorce proceeding, if it meets  the rules for QDRO.

To find out if a QDRO was issued to your spouse, you can call your spouse’s employer to find out contact information for the pension plan administrator and process to put in the request. Though as per ERISA (Employee Retirement Income Security Act), QDRO need not be issued as a separate legal order and may be included as part of a divorce decree or court-approved property settlement.