What is a Qualified Domestic Relations Order (QDRO)?

A Qualified Domestic Relations Order (QDRO) is a court order typically issued subsequent to a family court order addressing the equitable distribution of retirement assets. These orders are used to transfer employee benefit or pension plans subject to the Employee Retirement Income Security Act (ERISA). 28 U.S.C. Chapter 18. The establishment and requirements of QDRO’s are set forth in 29 U.S.C. § 1056.

The purpose of a QDRO is to transfer retirement benefits between separated or recently divorced spouses without that transfer becoming a taxable event for either spouse. Transfers of such assets that are authorized by a final order of marital property division, and that are accomplished via QDRO, do not become taxable events for either the transferring or receiving spouse. Such QDRO’s are provided to the plan administrator for the retirement asset and that plan administrator then transfers the asset(s) pursuant to the terms of the QDRO. Many plan administrators have their own form QDRO’s. Best practice is to obtain those forms from the plan administrator and then have the plan administrator review and approve the draft QDRO before it is submitted to the court for approval.

For defined contribution retirement assets–typically 401(k)’s, 403(b)’s and IRA’s–the QDRO will simply result in a one time transfer of retirement assets. For defined benefit retirement assets–i.e., pensions–when the employee spouse begins receiving retirement the plan administrator will send periodic payments to each spouse in the amount or percentages set forth in the QDRO.

Because QDRO’s are highly technical, it is often cost effective to have an attorney whose practice emphasizes drafting QDRO’s to handle the drafting.