How to Get a Qualified Domestic Relations Order (QDRO) in 6 Steps

A Qualified Domestic Relations Order (QDRO) is a document that is necessary to divide certain retirement assets per the settlement terms of your divorce.  Absent a QDRO a transfer from a retirement account, even if pursuant to the settlement agreement, would be taxed as a distribution.  Certain Individual Retirement Accounts (IRAs) are excluded from the QDRO process and only require a Letter of Intent to Transfer or a similar form, from the financial institution holding the IRA, in order to transfer funds.  The QDRO cannot be filed with the Court until after a Judgment of Divorce has been entered.  The QDRO process may seem drawn out and overly complicated, but this article will provide a roadmap so that you know where to start or where you may be in the process.

Step 1.  Gather Documents and Retain.  After getting divorced, the settlement agreement, Judgment of Divorce, DRO (Domestic Relations Order) drafting guidelines (if applicable) and relevant statements need to be provided to the company that will draft the DRO.  In addition, your share of the retainer for the drafting company must be paid.  The drafting company will then prepare a draft DRO.

Step 2.  Preparation of the Draft DRO.  The drafting company will prepare a draft DRO and you will have the opportunity to review the draft.  It is important your address is correct so that the plan administrator knows where to send future communications regarding the transfer of funds. 

Step 3.  Review of the Draft DRO by the Plan Administrator.  After you have reviewed the DRO, it must be sent to the plan administrator for review.  This is an important step because, if the DRO is drafted incorrectly it will not be implemented by the plan administrator. 

Step 4.  Approved DRO is Signed and Filed with the Court.  Once the plan administrator has approved the draft DRO, it should be finalized, signed by all parties, and submitted to the Court for filing.

Step 5.  Send the Filed DRO to the Plan Administrator for Implementation.  After the DRO has been filed with the Court, and returned to you by the Court, it must be sent to the plan administrator with the addendum containing personal identifiers for implementation.  The plan administrator will then, qualify the DRO - making it a QDRO - and implement the terms.

Step 6.  Transfer Funds Per Plan Administrator Instructions.  Once the QDRO has been implemented you and your ex-spouse should receive communication from the plan administrator, typically via regular mail, with instructions on how to transfer the equitable portion to a qualified retirement account.  This may require the party receiving the funds to open an IRA at a certain institution.  The party receiving the funds may take a taxable distribution at this time, and in certain circumstances avoid the 10% penalty for a distribution occurring before 59 ½ years old. 

Here are a few spots where the process might get stalled: 1) The Plan Administrator does not approve the draft or takes a long time to approve it; 2) Changes need to be made to the first draft and resubmitted to the Plan Administrator for approval; 3) Either party delays in signing the DRO; 4) The Court delays in returning the filed DRO; and/or 5) The Plan Administrator delays in implementing the DRO.

Tip:  The faster you obtain all requested documents, including a summary plan description and/or QDRO drafting guidelines, from your plan administrator, and pay the retainer of the drafting company, the faster this process will move along. 

If you would like to know more about the QDRO process or need assistance in completing the process, please contact me, Jessica N. Mazur at jmazur@hoaglandlongo.com or call me at 732-545-4717 x3859.