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How QDROs factor into the division of retirement assets - II

Last time, our blog began discussing how those couples who have been married longer have generally accumulated more assets, including retirement funds. We also discussed how if these couples someday make the difficult decision to legally dissolve their marriage, they should know that any division of these retirement funds -- from 401(k)s to profit sharing plans and pensions -- must be accompanied by what is known as a qualified domestic relation order.

To recap, a QDRO is a legally binding document establishing the right of the former spouse, otherwise known as the "alternate payee," to receive either a portion or the entirety of ERISA-qualified retirement assets.   

We'll continue this discussion in today's post, examining what elements must -- and must not be -- included in order for a QDRO to be considered valid in the eyes of the law.

The core elements of a QDRO

The elements that a QDRO must contain in order to be considered valid under ERISA include the following:

  • The names and most recent mailing addresses for both the alternate payee and the spouse participating in the plan
  • The names of all plans covered by the order
  • The percentage or dollar amount of benefits to be administered to the alternate payee, or the formula used to determine either the percentage or dollar amount
  • The timeframe covered by the order or the number of payments to be made to the alternate payee  

The elements that a QDRO must not contain in order to be considered valid under ERISA include the following:

  • A provision requiring a plan to provide for increased benefits
  • A provision requiring a plan to provide the alternate payee with any benefits or options not otherwise supplied by the plan
  • A provision requiring a plan to provide benefits to the alternate payee via a qualified joint and survivor annuity payable for the duration of their life and the life of a subsequent spouse
  • A provision requiring a plan to provide benefits to an alternate payee that are already promised to a different payee under the terms of another QDRO

We'll conclude our examination of this complex topic in a future post, answering some questions that typically arise in the context of QDROs.

In the meantime, if you have questions about the division of retirement assets or would like to learn more about property division, consider speaking with a skilled legal professional.

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