Why use a quadro or QDRO?

In order to divide retirement plans in a divorce, qualified plans need a Qualified Domestic Relations Order (QDRO) to divide tax free. A QDRO will allow the plan to be paid out to the alternate payee (non- employee spouse) without tax consequences to the employee.

A QDRO is not used to divide IRAs which can be divided under IRC §408.

QDROs cannot be used to divide stock options or non-qualified deferred compensation plans.

Benefits under a QDRO may be rolled over tax-free into an IRA or other qualified retirement plan. Any amounts not rolled over will be taxable to the alternate payee - the spouse receiving the benefits.

A QDRO which allows a one- time withdrawal by the alternate payee without the early withdrawal penalty (IRC §72(t)(2)(C)).  Ordinary income taxes are still due on these withdrawals.

Withdrawing funds from an IRA to satisfy a divorce judgment will result in the IRA owner to be taxed on the distribution as well as the 10% early withdrawal penalty.

Divorce agreements should always state that any retirement transfer is intended to be tax free.

If you are seeking a QDRO, you can contact me at Amanda@gordonfamilylaw.com for more information.

How do I calculate the length of our marriage?

There are two different dates to pay attention to when you calculate the length of your marriage.   

Are you trying to calculate the length of marriage for social security benefits or spousal military benefits?
For federal benefits, the date of marriage is measured from the date of marriage to the date of termination of status (the date your divorce decree is finalized).

Are you trying to calculate the length of marriage for spousal support and separate property?
California uses the date of separation as the date for the end of marriage to measure spousal support and the date on which all earnings become separate property.

What is a defined benefit plan and why do I need a valuation?

A defined-benefit plan like a Pension does not always have a straightforward value in the same way as an IRA or 401(k).

Instead, a pension is a promise by the employer to pay the employee a certain amount of money in retirement based on a specific formula. In order to get a value and for it to be fairly considered in the overall asset division, it needs to be valued by a professional. 

I have never worked. Can I get Social Security?

Experienced family law attorneys in the Bay Area will tell you that you may be able to collect social security. If you have been married for 10 years or more and our spouse has worked during that time, than you are entitled to one-half of your spouse's Social Security or your own, whichever is higher – even if you are divorced.  Your spouse also retains 100% of their Social Security benefit.  

What Is a QDRO or “QUADRO”?

A QDRO (or Qualified Domestic Relations Order) is Court order after a divorce or that splits and changes ownership of a retirement plan to give the divorced spouse their share of the asset or pension plan.

QDROs apply only to employee benefit or pension plans under ERISA.  
Retirement benefits are among the largest assets parties can own and these benefits are considered community property unless there is a premarital agreement stating otherwise.

QDROs were created by Congress to allow a Retirement Plan to pay a portion of the retirement fund to the non-employee spouse or the alternate payee. There is no limitation on the amount awarded to a non employee spouse. While many family lawyers may not tell their clients this fact, a QDRO distribution is not limited by federal law to 50% distribution.  In fact, under ERISA, the non employee can be awarded “all or a portion of” the benefits payable to or on behalf of a payee.  ERISA 206(d)(3)(B)(l)

If you are doing a QDRO yourself, you can request information from the Plan, in writing, including such as the Summary Plan Description and Annual Statement or Account Balance.  A word to the wise, do not count on a plan doing the actuarial valuation – that is something you will need to speak with a forensic accountant. 
Each retirement plan is different and many have specific rules. For example,in California, there is a joinder process for Family Court and the Court must have jurisdiction over a third party and you must join the Plan before administration.  
Additionally, you have to tell the Plan you are asking for a QDRO before you ask for a Court order.  It is best to speak with an attorney because you could cost yourself time and money if you simply fill in the blanks of a mock QDRO without carefully tailoring the document to your circumstances.  One more thing:  QDROs should be filed and served before your divorce is final.  Don’t wait to get your QDRO done – if the employee spouse dies before the QDRO is signed – then the non employee spouse will not be entitled to any benefits.

Looking to figure out if your retirement plan qualifies for a QDRO? Check out our nifty chart.