A Qualified Domestic Relations Order (QDRO) is a court order that divides you or your spouse’s retirement plan in the event of a divorce.
QDROs apply only to employee benefit or pension plans subject to the Employee Retirement Income Security Act (ERISA), which is the federal law that governs private-sector pensions.
QDROs are typically drafted by your attorney, signed off on by the judge, and then reviewed by the retirement plan administrator for compliance with the terms of the retirement plan and ERISA. The process of drafting the QDRO, the judge signing it, and it being approved by the plan administrator can take anywhere from 3 months to a year; depending on the retirement plan, the judge, and the administrator.
Sometimes separate attorneys who specialize only in drafting QDROs will draft this legal document. Other times, the retirement plan administrator has sample language that they give to the divorce attorney in order to draft the QDRO that meets the specifications of the specific retirement plan being divided. Always ask your retirement plan administrator for all forms to divide your retirement plan if you are getting divorced. Provide these to your attorney as soon as possible.
Most of the time a QDRO is a separate legal document from your divorce judgment. Any time a QDRO must be drafted this will increase the legal fees related to your divorce. If you are trying to keep fees down don’t divide retirement plans and try to find another way to divide your assets. Also know that many retirement plans charge an administration fee anywhere from $500-$1,500 to review and approve the QDRO. This fee is usually taken straight from the retirement plan being divided.
If you don’t have a QDRO then you will either not be able to divide your retirement plan or if you do, there will be penalties and taxes on any withdraw from the retirement plan. When in doubt, ask a good family law attorney.