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What is a QDRO and why do I need one?

If you are getting divorced and there are pension and retirement accounts involved, your divorce judgment will not be sufficient to allocate portions of your or your former spouse's retirement benefits to one another. What the two of you will need is a qualified domestic relation order.

Known by the acronym QDRO in legal circles, these domestic relations orders establish the rights of alternate payees to receive a portion of their former spouse's retirement benefits. These orders must include specific information and meet other criteria to be considered valid.

Whereas most divorce decrees, judgments or orders deal with spousal and child support and property settlements, a QDRO must comply with federal Employee Retirement Income Security Act standards set for these pension plans. A property settlement signed by the both spouses and the judge does not typically meet the minimum ERISA standards that are provided in QDROs.

Alternate payees are listed in the QDRO with their right to be disbursed all or part of a plan participant's retirement benefits. Alternate payees can only be current or former spouses, children or other dependents of the plan participant.

In order to be qualified under ERISA as a QDRO, the order must specify:

-- Name and last known address of participant and all alternate payees

-- Names for all retirement plans addressed by the QDRO

-- Specific percentage or amount of alternate payee's benefits, or the method to be used to determine this percentage or amount

-- Number of payments to be made or the specific time period addressed by the order

QDROs can't order plan administrators to give alternate payees anything that is not already specified in the plan and can't require, based on actuarial values, a provision for increased benefits.

If the plan participant already has one QDRO in place ordering benefits to be paid out to one alternate payee, a subsequent QDRO does not supersede that legal order.

As you can imagine, these are very technical documents best left in the capable hands of family law attorneys with experience drafting and executing QDROs.

Source: U.S. Department of Labor, "QDRO's - An Overview FAQs," accessed Nov. 11, 2016

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