Retirement assets require special consideration during divorce.
Certain retirement assets require additional court orders to ensure payout as agreed upon during the divorce. In these cases, the individual who is not listed on the retirement account would need a qualified domestic relations order (QDRO) to receive funds from the retirement account.
What is a QDRO?
A QDRO is a legal exception that allows the owner of a retirement policy to assign some or all of the benefits to a former spouse or child.
There are strict requirements to create a valid QDRO. A state authority such as a court must issue a judgement or order that formally approves the proposed property settlement agreement. Requirements for a valid QDRO include the name and mailing address of the listed participant to the plan, the name and mailing address of the alternate payee, the name of the plan impacted by the QDRO, the amount or percentage of benefits paid to each alternate payee, and the number of payments or time when the order applies.
Which accounts require a QDRO?
401(k), certain pensions and workplace retirement accounts generally require this additional court order or judgement for a non-listed ex-spouse to receive payment at the time of retirement.
The rules of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 guide plan administrators for these retirement accounts. These rules require special permission to provide payment to an alternate payee. The QDRO provides this permission and allows the plan administrator to move forward with the transfer.
Can I still get payment without a QDRO?
There are certain retirement plans, like IRAs, that do not require a QDRO. As such, you can still get payment from those retirement plans without the QDRO. However, payment from a pension or other qualifying retirement plan will require this additional documentation.