Dividing Retirement Assets Through A QDRO
A qualified domestic relations order (QDRO) or domestic relations order (DRO) is an order creating or memorializing the existence of a third party’s (“alternate payee”) right to directly collect and receive all or some benefits payable under a pension or retirement plan (“the Plan”). Federal pension plans and many private company pensions must comply with Employee Retirement Income Security Act (ERISA).
What Does That Mean?
Simply, it is the only way to get a retirement plan to pay the party who didn’t earn the retirement.
What Is ERISA?
ERISA is a federal law that protects assets placed in retirement plans by setting minimum standards for such plans in the private industry. While ERISA does not require employers to create pension plans for their employees, it does require employers who do establish plans to meet the set minimum standards and follow specific rules.
ERISA provides detailed requirements for assigning benefits to the alternate payee. Under ERISA, the plan can only provide payment to the employees themselves, unless ordered otherwise by an order in compliance with ERISA requirements.
The common issues we see again and again revolve around parties who attempted to assign the community’s interest in property (i.e., pension or retirement) through a marital settlement agreement without a formal DRO or QDRO. However, just because a property settlement agreement has been reached and signed, and perhaps even notarized, does not in and of itself cause the settlement agreement to be an enforceable domestic relations order. The plan itself must be joined as a party before a QDRO can even be considered.
The QDRO or DRO thereafter must be prepared pursuant to the minimum requirements established through ERISA and/or the plan.
QDROs and DROs require experience and knowledge. Make sure your attorney is familiar with preparing such orders before you even start your divorce!
Please call McCoy Fatula in Roseville, California, today to speak with one of our attorneys about your retirement savings and divorce. We are available via phone at 916-945-2780 and by email, and we look forward to speaking with you. A partner attorney is always working on your case at McCoy Fatula.