Basic Requirements for a QDRO
A qualified domestic relations order or QDRO for short, is a document that is needed to split certain retirement benefits in the context of a divorce. Specifically, all benefits governed under ERISA (Employee Retirement Income Security Act of 1974) require a QDRO for division. ERISA plans may include pensions, 401Ks, profit-sharing plans, and stock ownership plans. A few examples of plans not governed by ERISA are local state or municipal plans, IRAs, or military benefits. There are certain base requirements for all QDROs. One, you must identify the name and address of both the participant spouse and the alternate payee, or party now standing to receive a portion of the benefits.
Two, you must specify exactly how much the alternate payee is to receive. This can be done a few different ways including as a fixed dollar amount or a percentage of the marital portion of the plan. The marital portion will be determined by looking at the years married in comparison to the total number of years as an employee earning benefits. Third, you need to explain when or how the benefits will be distributed. For many retirement benefits, the alternate payee cannot begin to collect until the participant spouse retires. Finally, the plan must be clearly identified. Certain plans may have specific language they want used or a particular template to file. It is wise to enlist the services of a company that routinely drafts QDROs to ensure the language is correct and all requirements are met.
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