Frequently Asked Questions on QDROs

1.    Why do I need a QDRO?

The government wants you to save for retirement. To encourage you, it lets you delay paying taxes on the income you put into a retirement plan until you take it out. There are many rules to keep that money in place. If you take it out early, you’ll pay taxes immediately, and may owe a penalty. You can’t spend that money now. But you can transfer the money to your former spouse at divorce without paying the taxes or penalty, if you do so by a special kind of court order called a “QDRO.”

2.    A court order?

Yes. A 401(k) or pension plan is a legal entity, a trust, created by your employer. A QDRO directs the plan to do specific things. Because it’s a court order, the plan must obey, if it can legally do so.

3.    If I hire you, what will you do for me?

First, I review your account statements and separation agreement, and any instructions you provide. Then I get in touch with the plan to request any model language, if I don’t already have it. Then I draft the order, using that model language as a base. I send the draft to you for review, and, if possible, make the corrections you request. Then I send the order to the plan to find out if they can obey the order or if it needs any changes. After the plan okays it, I send you a draft of the order, ready to file with the court, and directions on where to send the order after it has been signed by the judge.

4.    File with the court?

Yes, I draft a court order, but it’s not binding on the plan until a judge signs it.  You (or your representative) must file it with the court to ask a judge to sign it.

5.    Who files it?

Usually, the Alternate Payee or his or her attorney files it (by mail, after the divorce date). But if you’d like, and if I'm hired jointly by the parties, you can usually hire me at an hourly rate to prepare and circulate the filing documents.

6.    After the judge signs it, what do I do?

Send a court-certified (stamped) copy to the Plan to implement.  The order will have no effect unless the plan gets a copy signed by a judge.  Make sure that you get confirmation from the plan that they've received and "qualified" (processed) the order.

7.    How long does this all take?

It varies a lot, but often takes between three and five months, starting when I receive all required paperwork from you.

Steps:

First draft:                                                                                Usually a week or two
Coordinate with client(s), including re-drafts:          Immediate to months
Coordinate with Plan, including re-drafts:                Usually, 4 to 10 weeks
Waiting for court to sign                                                   Depends on the court
Waiting for plan to implement signed order            5 to 8 weeks