Qualified Domestic Relations Orders (QDRO)
Many divorces involve the award of retirement benefits from one spouse to another.
Qualified Domestic Relations Order
Many divorces involve the award of retirement benefits from one spouse to another. In most cases this will require the preparation of a special kind of court order called a Qualified Domestic Relations Order. This is also often referred to as a QDRO or a QUADRO.
Why is a QDRO Required?
Retirement accounts carry with them special benefits such as deferred taxation, guaranteed payment, and the right to have someone else take the benefit when the participant passes away.
Because many Americans rely on their employer-provided retirement plans for their retirements, Congress has passed several laws protecting these benefits. These laws require the use of a Qualified Domestic Relations Order to preserve the benefits of these accounts when a divorce court orders a transfer to a former spouse.
What Kinds of Retirement Accounts Need a QDRO?
Most employer-provided retirement plans will require the use of a QDRO to transfer the benefits to a former spouse. Some of the most common examples are 401(k) and traditional pension benefits. Other kinds of employer-provided retirement plans may require similar orders that go by different names, such as:
- Court Order Acceptable for Processing (COAP)
- Retirement Benefits Court Order (RCBO)
How Long Does the QDRO Process Take?
The time it takes to get a QDRO prepared, signed by a judge, and accepted by the retirement plan varies greatly. Sometimes it only takes a few weeks, and other times it can take months or even years. Even then, payout of the benefits may not start right away.
Especially with pensions, the person awarded benefits may have to wait until they reach retirement age to begin receiving payments. However, most 401(k) plans and similar “cash-value” plans allow immediate withdrawal.
⚠️ There are significant tax and investment consequences to early withdrawals, so it’s important to consult a tax professional and investment advisor before taking money out.
What is a QDRO Going to Cost?
We charge only for the time we spend working on a client’s case, and every case is different. In most cases, the fees for each QDRO will be around $1,000.