We realize that separation or divorce is a stressful experience and that the QDRO process can be somewhat complex, confusing and mysterious. We have prepared answers to many frequently asked questions from clients for your convenience. We hope you will find it helpful.
All types. Private (corporate) pension and benefits plans, including but not limited to 401(K), 403(b), 457, defined benefit monthly payment, TIAA/CREF, etc., may be divided by QDRO's pursuant to a Federal law called ERISA. Military retirement pay, federal and state civil service plans, Railroad Retirement Plans and IRA's may also be divided by similar Orders.
If you delay in obtaining a QDRO, you may lose valuable rights and run the risk of forfeiting all of the benefits awarded to you in your divorce. Your rights may be lost if your former spouse does any of the following before your QDRO is submitted to the pension plan and accepted by the plan:
All of our work is done on a fixed fee basis of $760.00 per QDRO.
First, some of the QDRO preparation firms which advertise on the internet are operated by clerks, inexperienced attorneys, non-college graduates, stockbrokers, etc. with little or no formal legal training. QDRO's are very complex legal documents and should be prepared only by a highly-qualified attorney and staff. Michael O'Connell is a graduate of the University of South Carolina Law School, with excellent credentials and over 20 years of family law legal experience.
Second, our low fixed fees are guaranteed. We will never charge a client over our flat fee for any of our services. Unlike QDRO Solutions, many other QDRO firms have hidden extra fees and charges buried in the fine print.
Finally, you can rely on us for the prompt, personal service and attention you deserve in the division of the relevant retirement plan, which most often comes at the end of your case, when you are more than ready to have all of the issues resolved.
There are usually 7 steps required to complete the QDRO process:
We must have complete information about both parties as set forth in the QDRO information form (names, addresses, social security numbers, date of birth, date of marriage and divorce, etc.). We also need copies of your divorce decree or separation agreement so we can evaluate how much each party is to receive. In addition, except in military or federal civil service plans, we require two important documents from the retirement or pension plan to be divided - The Summary Plan Description (SPD) and Written QDRO Procedures (WQP). We will contact the plan to request this information if it is not included in your application.
Once we have received all the information described above, we will quickly and properly draft your QDRO and send it to you or your lawyer for review. Please review this draft carefully to make sure all information is accurate. If you have any questions about the draft or corrections to be made, please let us know. We make every effort to accomplish this step within one week of our receipt of all requested information and the fee.
If you and/or your lawyer agree with the draft QDRO, it will be up to you to send it to your spouse (unless you ask us to) or their attorney for review and approval. The other side should, acting reasonably, accept the QDRO, as long as it accurately reflects the underlying provisions of the divorce decree or separation agreement. However, people do not always act reasonably in divorce cases. It is usually preferable for you to obtain the other side's consent to the QDRO. If you feel your spouse will unreasonably delay or hinder this step, or if the situation is an emergency, it is potentially possible for us to assist or even to omit this step. Please let us know if this is the case.
Please do not sign your QDRO at this point or ask your former spouse to do so until step 4 is completed.
Once you (and/or your spouse) agree to the Order, we send the QDRO to the appropriate retirement or pension plan for approval in draft form. If the plan requests any changes in the QDRO, we will negotiate them with the plan. It is not unusual for plans to request changes in QDRO's. In fact, this happens in about 50% of the cases. Many plan administrators require certain language in QDROs that may not be required by law but we must use their language to get the QDRO approved. Do not be alarmed if you receive a copy of a letter from the plan requesting changes in the draft QDRO. These usually involve minor changes in wording which will not affect the amounts involved. We will work out any changes requested by the plan.
Military and Federal civil service pension division Orders are different and will not be reviewed as drafts by the plans, so this step is omitted in those cases. A few corporate plans also decline to review draft QDRO's in advance. In such cases, step 4 is omitted and you proceed directly to step 5.
Once the plan has pre-approved the QDRO in draft form (or where approval is not allowed), we will send you a final copy, which (except as set out above) requires the signatures of all parties. It then must be presented to your state divorce or family court for signature by a judge. This step is done by the party (or parties) and/or the attorney(s), never by QDRO Solutions.
Once the original QDRO has been signed by a judge, you should obtain several certified copies of the QDRO. A certified copy is one which bears the original signature and seal of the clerk of the court. A certified copy usually may be obtained from the clerk of the state divorce court for a small fee. You must send a certified copy to the plan for final approval, acceptance and payment. In military and civil service cases, additional certified copies and certain other documents will be required. We will send you the other documents which are needed in these cases.
Once you have sent the certified copy to the plan, it is generally approved quickly, especially if the plan has already reviewed the QDRO as a draft in step 4.
Completion of the seven (7) steps described above normally takes a couple of months (it can take longer), depending on the complexity of the plan, the clarity and precision of the wording of your divorce decree or separation agreement, whether your former spouse is cooperative or hostile, and other factors. We generally respond to all drafting requests and correspondence within one week in order to keep your case moving forward. We are always available via email for status reports. The longest component of the process is usually how long it takes the retirement or pension plan to review draft QDRO's and respond to communications from us. We keep a fire lit under each plan administrator to approve our drafts as quickly as possible.
Some retirement or pension plans make funds payable under QDRO's available as soon as they approve the QDRO. If the plan being divided is an IRA or a Federal Thrift Savings Plan, the funds may be withdrawn immediately. However, to protect you, the funds generally should promptly be rolled over into a qualified plan or IRA in your name. Most, but not all, 401(K), 403(b), 457 and TSP plans also permit immediate withdrawal. Some plans will not allow the funds to be available until after the employee retires or at least attains the earliest retirement age allowed by the plan (in some cases as low as 50 or 55).
All of our QDRO's are drafted to require the retirement or pension plans to make your funds available at the earliest possible time allowed by law. However, a QDRO cannot override the federal law governing QDRO's or the written terms of the plan itself, which specify and control the earliest date when payments can begin.
This depends on the type of plan involved. 401(k), 403(b) and 457 Plans (also known as Defined Contribution Plans), IRA's, ESOP's and Thrift Savings Plans usually permit cash distributions. Most pension plans (also known as Defined Benefit Plans) and military and federal civil service plans only permit monthly payments, not lump sums. A QDRO cannot override the terms of the plan itself which specify the form in which payments can be made.
There are two answers to this question:
1. With a QDRO, the transfer of a portion of a pension or retirement awarded to a spouse is not taxable to the other spouse.
2. When a spouse who was awarded a portion of a retirement or pension spends the money, they must pay taxes on the amounts spent.
If you receive a distribution from your former spouse's 401(K) or other plan, after the plan creates a separate account in your name, if you choose, you can roll those funds over into your own 401(K) plan or an IRA. If you do this properly, you will not have to pay income taxes on those amounts at the time of the rollover. Rollovers of this kind are not arranged in the QDRO itself. You can arrange a rollover directly with your former spouse's plan.
Monthly payments from a Defined Benefit Plan or a military or federal civil service plan cannot be rolled over into another plan or IRA. They are taxable to you when received.
If you are going to need funds immediately, you can avoid the 10% penalty on early withdrawals (prior to age 59-1/2) by taking the funds directly from your portion of the former spouse's 401(k) or similar plan under a QDRO under Section 72(t)(2)(c) of the Internal Revenue Code. However, you must request this immediate distribution prior to rolling any remaining funds into your own qualified plan or IRA. If you first roll the funds over into your own plan or IRA and then withdraw them from your own Plan, you may needlessly re-subject yourself to the 10% penalty. (Note: The 10% penalty is mandatory and there is no way to avoid it if your spouse's plan being divided is an IRA rather than a 401(k) or similar plan).
If you take a cash distribution from your former spouse's plan rather than rolling the funds over into your own retirement plan, the plan is required by federal law to withhold 20% of the amount you receive for federal income taxes. This is similar to having federal income tax withheld from your paycheck. You will be able to claim the amount which the plan withholds on your federal income tax return when you file it the year following the payment to you.