A QDRO is a Qualified Domestic Retirement Order. In a divorce, the two parties should seek equitable redistribution of accrued retirement assets.
Many couples seeking divorce may be familiar with custody orders, child support and parenting plans. QDROs are less well understood.
1. Do California courts divide retirement plans using QDROs?
Yes. Even though California is a “community property” state, both parties do not always have equal claim to the retirement funds. Any retirement funds or credits that your spouse accrued during the marriage are usually divided equally. Funds that you accrued or began investing prior to the marriage may be up for negotiation, especially if a prenup agreement was in place.
2. Does every type of retirement need a QDRO?
No. Individual retirement accounts (IRAs), government plans such as military or public service plans and deferred annuities are usually not a part of the QDRO process. You should create a QDRO for:
- corporate defined benefits or pension plans
- 401(k), 403(b) and 457 plans
- employee stock ownership, and
- tax-sheltered annuities.
3. What is an alternate payee and how much will they get?
California law specifies that the person earning the benefits is the participant (earner) and the person receiving the benefit transfer is the alternate payee. You need a QDRO to supersede existing law under which the retirement funds administrator can only send money to the participant. The QDRO makes it possible to send money to the alternate payee. There is a formula that the retirement administrator uses to determine how much the alternate payee receives.
Pay attention to the details. The U.S. Government Accountability Office estimates that QDRO failure occurs because the documents are missing basic information. Do not let carelessness prevent you from having financial stability down the road.