What is a QDRO?
QDRO is shorthand for “Qualified Domestic Relations Order,” the legal instrument that allows for a person to assign rights in a retirement account subject to ERISA to another person. If you are splitting a 401(k), pension, or other qualified plan you will need to obtain a QDRO in order to access the funds without incurring a tax penalty. Simply making a withdrawal from such a plan incident to divorce would trigger a tax event. A QDRO avoids this problem.
A QDRO will need to contain specific language instructing the plan administrator as to how the funds should be dispersed. At a minimum, as mandated by ERISA, the QDRO will require:
- The name of the plan
- The name and last known mailing address of the participant
- The name and mailing address of the participant
- The name and mailing address of the alternate payee (spouse of employee)
- The amount to be paid
- The manner in which the payment is to be determined
- The number of payments or period to which the order applies
Once drafted, the QDRO will be submitted to the court for judge’s signature, and it will subsequently be sent to the plan administrator.