How do QDROs work?
A Qualified Domestic Relations Order (QDRO) is a court order that divides a retirement plan according to plan rules and applicable law associated with that plan. After a plan determines that a court order meets the requirements of the law and its rules to be considered a “QDRO,” the plan (not the participant) will pay directly the nonmember (ex-spouse) the awarded share of the benefits.
For example, if the plan pays a monthly benefit, each party will receive their share directly from the plan without needing to go through the other. If the plan is a 401k, the community and separate property shares will be segregated with each spouse having their own retirement accounts. Each recipient will be taxed only on the amount she or he receives.
As soon as the QDRO has been signed by a judge, it should be sent to the retirement plan for implementation. This protects both parties to move forward in obtaining their share of the benefits when payable. The nonmember spouse in the QDRO has the right to receive plan information and materials to understand the benefits the former spouse will be receiving to make informed decisions on how he or she will receive benefits. Generally, the former spouse should expect to receive plan information and/or a distribution package within 30 to 60 days following the plan’s final approval of the QDRO. Since each plan has different administrative policies there is no perfect answer to this question. If you do not hear from the plan within a reasonable time, you should contact the plan for information and implementation.
- Editorial Team
- June 27, 2023
- 1:01 pm
- 0 comments
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