What is a QDRO and do you need one?

 A Qualified Domestic Relations Order (QDRO) is generally part of a marital settlement agreement that recognizes an alternate payee's right to part or all of the right to receive benefits payable to a participant under a retirement plan. (US Dept of Labor definition).

In other words, when one of the parties to a divorce has a retirement account (s) that is larger, or if it is the only retirement account a divorcing couple has, a QDRO is the only permitted mechanism to divide the account between the parties. But retirement plans are heavily regulated by  federal  and state law, especially as it pertains to who is allowed access to the funds and when payments may be made.

The IDMA, section 503 (b) (2) recognizes that the division of benefits via a QDRO is presumed to be the division of marital assets.  This provision gives Illinois Courts authority to sign an order requiring a plan administrator to pay out some or all of the retirement benefits to someone other than a plan participant.

It may sound easy enough.  Get a QDRO signed at the time of the entry of the Judgment of Dissolution of Marriage.  The Judge has authority to enter an order dividing a defined benefit or defined contribution plan. But the order must be approved by the plan administrator before it is signed by a Judge and this is where things can get complicated.

All QDRO's must contain certain information, such as the name of the plan participant and alternate payee as well as the date of valuation of the benefits. In addition, plan administrators often have their own "approved" plans.  Some are simple and straightforward; others are complicated and full of minutia. 

If a retirement plan (s) is  going to be divided as part of a marital estate, a QDRO will be necessary.  It's best to discuss this with your attorney as part of your settlement discussions. There may be other options available that will obviate the need for a QDRO, such as getting a larger portion from the proceeds of the sale of the marital home.  Your attorney will be able to provide legal advise about a need for a QDRO.