To divide most retirement accounts other than IRAs in a divorce you need a QDRO (Qualified Domestic Relations Order). A QDRO requires a number of steps which take time – usually several months. The biggest source of delay is often the retirement plan administrator.
Because there are so many steps, it’s wise to start the process as soon as possible in a divorce. If possible, submit the QDRO to the court along with or before the divorce settlement paperwork.
You may want to assign responsibility for overseeing the QDRO process to one spouse or the other. If you have a good QDRO professional, they should also closely monitor the process so the QDRO moves forward to completion.
It has happened that divisions of retirement accounts specified in divorce decrees never got implemented because the QDRO process wasn’t completed. If you wait too long after a divorce to complete the process, problems can arise.
The steps required for implementation of a QDRO are essentially as follows.
1. Select a QDRO professional.
2. When you know which retirement plans will be divided/reassigned, the QDRO professional files a joinder with the court for each plan to be “joined” into the divorce.
3. Receive the approved joinder from the court.
4. The QDRO professional has the joinder served on the retirement plan administrator.
5. Decide exactly who will get what from the retirement plans to be divided/reassigned. Usually couples divide no more plans than necessary to avoid paying for too many QDROs. Provide your settlement document to the QDRO professional.
6. The QDRO professional determines the QDRO drafting requirements for the retirement plan. Often the plan administrator will provide “model QDRO language.”
7. The QDRO professional drafts the QDRO.
8. The spouses review the draft QDRO to confirm it specifies what they have agreed.
9. The QDRO professional submits the draft QDRO to the retirement plan administrator and asks for confirmation that the QDRO will meet the administrator’s requirements.
10. The retirement plan administrator confirms that the draft QDRO is acceptable.
11. The spouses sign the QDRO.
12. The QDRO professional submits the QDRO to the divorce court for approval and signature by the judge.
13. The judge approves and signs the QDRO.
14. The QDRO professional has the QDRO served on the retirement plan administrator.
15. The retirement plan administrator carries out what is ordered in the QDRO by creating a new account for the non-employee spouse and dividing/reassigning the retirement benefits.
16. If the non-employee spouse wants the benefits to be transferred out (say to an IRA) or paid out in cash, the non-employee communicates this to the retirement plan administrator in a manner acceptable to the administrator. Often the administrator has forms for this.
What if I do not agree with the amount and cannot live off the pension?
It’s hard to answer because I don’t where the amount came from and whether it represents what you’d be entitled to according to the law. In court, judges are supposed to follow the law. In mediation you can try to negotiate a settlement that will give you enough to live on.