Q Tips for QDROs

QDROs (the term, QDRO, is used in a generic sense in this article to refer to Retirement Plan Division Orders of various types) often prove frustrating for attorneys in divorce cases. A QDRO has to address certain issues of concern and must be written carefully, addressing these issues adequately. In addition, drafting a QDRO often takes more time than attorney can bill.

All pension (defined benefit plans) and 401(k)'s, stock ownership plans and other profit sharing plans (defined contribution plans) can be divided under a QDRO, including private, company (Employment Retirement Income Security Act (ERISA)-based) plans as well as city municipal plans, state public systems, federal plans and military pensions. Simply providing the non-employee spouse (the alternate payee) with a portion of the employee's (participant's) benefits by means of a QDRO is usually not enough. Using the employer model QDRO as a guide may not sufficiently provide adequate results for the alternate payee because of several issues that must be addressed properly.

These are some of the basic issues of concern that divorce attorneys address when drafting a QDRO:

• A. Understanding and being able to explain the provisions and implications of the client's rights and entitlements, particularly as relates to potential survivor rights and plan benefit calculation.
• B. Protecting the client for correct benefit share at date of retirement depending on the divorce decree or settlement arrangement.
• C. Assuring the alternate payee of a lifetime of benefits giving due consideration to the possibilities of participant disability or death before or after retirement.
• D. Protecting the client with respect to the possibility of early retirement or post retirement cost of living adjustment.
• E. Including language that protects the alternate payee from actions by the participant, to the disadvantage of the alternate payee.
• F. Incorporating language in a QDRO that refers to the distribution arrangement set forth in the settlement agreement or judgment of divorce.
• G. Getting pre-approval from the plan administrator to ensure the QDRO is approved in accordance with the intent of the parties.

It would be helpful to give consideration to these issues in development of the settlement agreement or decree. The attorney may consult an actuary for support and assistance in drafting a QDRO. The specialized knowledge and expertise of the actuary as an attorney resource could minimize any possibility of a QDRO compromising a client's benefit. Use of an actuary could very well be beneficial for all parties as well as economical.