Separate Interest and Shared Interest QDROs

Do you know the difference between a separate interest and a shared interest QDRO? Understanding the difference may affect how you discuss support with your clients.

Private defined benefit pension plans being divided in a dissolution proceeding will be divided with either a separate interest QDRO or shared interest QDRO. In order to determine, what type of QDRO is necessary in your case it is essential to know whether the employee/participant has retired and begun receiving retirement benefits.

If a participant is retired, then a shared interest QDRO must be prepared. A shared interest QDRO is required as the participant is already receiving a monthly pension benefit. Once a participant has retired under the pension plan, then the alternate payee must also start to receive a monthly pension benefit. The alternate payee cannot choose to start receiving a monthly pension benefit at a later date after the participant. 

Most private defined benefit pension plans will require a separate interest QDRO if the participant is not retired. However, there are a few plans (mostly union) which will require a shared interest QDRO. There are also a few plans that will accept a shared interest QDRO even though the participant is not retired. If your case calls for and the pension plan accepts (not requires) a shared interest QDRO for an active participant, you need to be careful to protect the alternate payee. The QDRO will need to be prepared to require that the participant select a joint and survivor annuity. In this manner, the alternate payee will receive survivor benefits. 

Knowing the difference between a separate and shared interest QDRO and how that impacts your client is important.