What is a QDRO?

One element of property division in a California divorce may involve splitting retirement plans. Certain types of retirement plans require a qualified domestic relations order as part of the final divorce decree in order for a spouse to gain access to those funds after the divorce. At Kearney Baker in Pasadena, our experienced divorce attorneys understand when a QDRO is required as part of your divorce settlement and will ensure that you receive everything that you are entitled to after a divorce. Call or contact our office today if you’re asking, “What is a QDRO?” 

What is a QDRO?

A qualified domestic relations order (QDRO) is a decree from the court as part of a final divorce settlement that orders a retirement plan to give some, or all, of the funds to the spouse that is not the named participant of the fund. A QDRO can provide benefits to an alternate payee while the named participant of the fund is still alive or assign survivor benefits after the named participant’s passing. 

A qualified domestic relations order applies to all retirement funds that fall under ERISA, or the Employee Retirement Income Security Act, such as a 401(k) or 403(b). A QDRO must contain the names and mailing addresses of the plan participant as well as the alternate payee, the name of each retirement plan the order applies to, the dollar value or percentage of the plan going to the alternate payee, the number of payments in the order, and the time frame of the order. It is critical to get a qualified domestic relations order as part of the final divorce settlement for these types of retirement plans, otherwise a divorced spouse may not be able to access the funds even if they were awarded in the property distribution. 

Fund Distributions With a QDRO

There are a couple of different options when it comes to fund distributions with a QDRO retirement account. One option is to take a lump sum payment, but the alternate payee will pay taxes on the distribution immediately. Another option is to take distributions as an annuity over time, which spreads the tax burden into installments. The money in a retirement plan subject to a qualified domestic relations order can also be rolled over into an IRA account for the alternate payee, which also keeps the funds tax deferred.

It is also important to note that money withdrawn or rolled over from a QDRO account is not subject to the ten percent early withdrawal penalty for distributions taken prior to age 59½, regardless of the alternate payee’s age. If you would like to learn more about qualified domestic relations orders and how they may impact your California divorce case, speak with an experienced divorce attorney today. 

Talk to Kearney Baker Now

Do you have questions about qualified domestic relations orders and whether the retirement funds in your family apply? Call the office or contact us today at Kearney Baker in Pasadena to schedule a case consultation and learn more.