The short answer to this question is you should not wait for retirement to file a QDRO! If you delay filing a QDRO, and wait until your ex-spouse retires or you need the money, you may lose valuable rights or even lose some benefits that you are entitled to receive. I never say that lightly and never use it as a scare tactic, it comes from genuine concern over unfinished divorce matters. I am going to jump right into the “why” and the “if you don’t” as it is truly one of those topics that often are unaddressed.
If a QDRO is not done before a participant’s death or retirement and the parties are divorced, then the ex-spouse (the non member of the retirement plan) may not receive any funds. Yes, even if it is mentioned in your Judgment or/MSA! This is why it is so important to not delay getting your QDRO!
If you recall our “What is a QDRO” blog, the only way for a former spouse to be paid money directly from retirement plans is through a domestic relations order (DRO) or a qualified domestic relations order (QDRO). A plan will not pay any benefit directly to the former spouse without a QDRO. The ex-spouse will not receive any retirement benefit now or in the future without a QDRO.
“If you are already divorced, it’s not too late to do a QDRO. But you should move forward with this paperwork now so there is no loss of benefits. At QDROCounsel, we often get calls from an ex-spouse asking to create a QDRO after a participant has died, and in many cases, there is no way to help that person.”
Another reason why you should consider filing a QDRO as soon as possible is because the participant may engage in activities that take money away from what could be paid to the former spouse. For example, prior to the entry of a QDRO, a participant may be able to take a loan or withdraw funds from their account. These activities mean less money is available to pay the former spouse and next to impossible to recover.
The bottom line is after your judgment is finalized, if there was a retirement account awarded to a former spouse then a QDRO must be drafted, filed and sent to the retirement plan to secure your rights to those benefits. Just stating in the divorce documents that one party is awarded the marital or community property does not divide the benefit. For any type of retirement account division, you need a QDRO.