Many people going through a divorce have much of their assets tied up in their retirement accounts. Despite the fact that your retirement account is in your name, that is not enough to protect it in a divorce. Indiana law treats all assets as marital property and will likely view your retirement account the same way. Except in rare cases, any retirement accounts in the marriage will be pooled together with other assets and divided in the divorce decree.
Different types of retirement accounts require different methods for division and transfer. Many people have a pension or a 401(k) or a 403(b). The 401(k) and the 403(b) are private investment accounts set up by an employer and funded by the employee, the employer or both. If either of you has one of these accounts or certain pensions, you will need a special court order called a qualified domestic relations order (QDRO) to transfer the funds after the divorce to the other spouse.
The purpose of a QDRO
If the court awards you a portion of your ex’s 401(k) or pension plan, you will need to ask the court to issue a QDRO. This order directs the financial institution to divide the funds without penalty. Under ERISA rules, most retirement account administrators can only pay benefits to the plan participant and need special permission to transfer funds to an “alternate payee.” The QDRO gives the plan administrator that permission. It also allows for a non-taxable transfer.
Information a QDRO must include
The plan administrator will look for your QDRO to contain very specific elements, including:
- The name of the retirement plan at issue
- The mailing address of both the participant and the alternate payee
- The amount of benefit to be paid to the alternate payee (either in dollar amount or percentage)
- The time frame for benefit payments (either in number of payments or period of time)
The QDRO may not vary from the original plan benefit types and options, conflict with another QDRO or be issued as a joint and survivor annuity.
The QDRO process can be complex. Most plan administrators have strict requirements. Your divorce attorney can assist you with this process to make sure you complete all necessary steps accurately.