In order to effectively divide a qualified plan – including pension plans, profit-sharing plans, and 401(k) plans – a Qualified Domestic Relations Order (QDRO) must be entered by the Court. It is not sufficient for your separation agreement or divorce decree to state that you are entitled to a portion of your spouse’s retirement. The administrator of the plan will not pay your share to you without a QDRO which is signed by a judge.
A QDRO is not needed to divide a non-qualified plan such as an individual retirement account or an annuity. The Qualified Domestic Relations Order provides a safeguard for the ex-spouse receiving a share of the pension in that it prevents the employee spouse from disposing of the other spouse’s share. It also ensures that each spouse receiving a portion of the pension or retirement becomes responsible for his or her individual share of the income taxes due on that money.
