When a couple divorces and one or both spouses have retirement accounts such as a 401(k), pension, or other employer-sponsored plan, dividing those assets is often a key concern. One of the most important legal documents involved in this process is the Qualified Domestic Relations Order (QDRO). A QDRO is a legal order that allows for the division of retirement plan assets between spouses following a divorce or legal separation. However, there can be confusion about who is responsible for filing a QDRO and how the process works. In this article, we will clarify the process, discuss who is responsible for filing a QDRO, and provide an overview of what you need to know about this essential legal step.
What is a QDRO?
Before diving into the responsibility of filing a QDRO, it’s essential to understand what it is and why it is needed. A QDRO is a court order that recognizes one spouse’s right to receive a portion of the other spouse’s retirement benefits. It is required for dividing most employer-sponsored retirement plans, such as 401(k)s, pensions, and 403(b)s.
In divorce proceedings, retirement accounts are often considered marital property. As part of asset division, the court may order that one spouse receives a percentage of the other’s retirement plan. To ensure that this transfer is executed legally, a QDRO is needed. Without a QDRO, the retirement plan administrator cannot release funds to the non-employee spouse.
Who is Responsible for Filing a QDRO?
The responsibility for filing a QDRO can be complex, and the answer to who is responsible for filing a QDRO largely depends on the circumstances of the divorce and the parties involved. Typically, it is the responsibility of one of the spouses, often with the help of their attorney, to initiate the filing. Below are the common parties involved in the QDRO process:
1. The Divorce Attorney
In many cases, one of the spouses’ divorce attorneys will be responsible for preparing and filing the QDRO. During divorce proceedings, the attorneys work with their clients to determine how marital assets will be divided, including retirement benefits. If the court orders that one spouse is entitled to a portion of the other spouse’s retirement plan, the attorney will typically draft the QDRO.
Once the QDRO is drafted, it is submitted to the court for approval. After the court issues the QDRO, it is then sent to the retirement plan administrator, who processes the transfer of funds. The attorney plays a crucial role in ensuring that the QDRO complies with both state and federal laws, as well as the specific rules of the retirement plan.
2. The Plan Administrator
While the plan administrator does not handle the filing of the QDRO itself, they play a key role in ensuring that the order is implemented correctly. Once the court approves the QDRO, it is sent to the retirement plan administrator, who will review it to make sure it complies with the plan’s rules.
The plan administrator’s job is to verify that the QDRO meets the requirements set by the plan, such as ensuring that it correctly identifies the employee, the spouse, and the exact amount of benefits to be divided. If there are any issues or discrepancies with the QDRO, the plan administrator may reject it and send it back for revisions.
In some cases, the plan administrator may also have specific procedures for submitting a QDRO, such as submitting a draft for their review before the court’s approval. It’s important for the attorney handling the QDRO to work with the plan administrator early in the process to avoid delays.
3. The Non-Employee Spouse
While the non-employee spouse (the one receiving a portion of the retirement benefits) is typically not responsible for drafting or filing the QDRO, they must be actively involved in the process. The non-employee spouse should ensure that their attorney is taking the necessary steps to file the QDRO and follow up with the attorney to make sure the document is filed properly.
If the non-employee spouse is unrepresented by counsel, they may be required to take on some of the responsibility for filing the QDRO. However, it is highly advisable for both parties to have legal representation to navigate the complex requirements of QDROs.
The QDRO Filing Process
Now that we’ve discussed who is responsible for filing a QDRO, let’s look at the process itself. While the specifics can vary depending on the retirement plan and the details of the divorce, here are the general steps involved in filing a QDRO:
1. Obtain the Plan’s QDRO Requirements
Each retirement plan may have different requirements for what must be included in a QDRO. The first step is to obtain the specific rules from the plan administrator or review any guidelines the plan may have for QDROs. These rules will help ensure that the QDRO is drafted in a way that is compatible with the retirement plan.
2. Draft the QDRO
Once the plan’s requirements are understood, the next step is to draft the QDRO. This document must specify details such as:
• The name of the retirement plan
• The names of both spouses
• The percentage or specific amount of the retirement benefits to be transferred
• Whether the benefits are to be paid as a lump sum or over time
A divorce attorney who specializes in QDROs can help ensure that the language in the order complies with both state law and federal regulations.
3. Submit the QDRO for Court Approval
Once the QDRO is drafted, it must be submitted to the court for approval. The judge will review the QDRO to ensure that it aligns with the terms of the divorce settlement or court order. If the judge approves the QDRO, it will be signed and become an official order of the court.
4. Send the QDRO to the Plan Administrator
After the court signs the QDRO, the next step is to send it to the retirement plan administrator. The plan administrator will review the QDRO to ensure it complies with the plan’s rules. Once approved, the plan will begin to divide the benefits as outlined in the QDRO.
5. Receive the Divided Funds
Once the QDRO is processed by the plan administrator, the non-employee spouse will receive their portion of the retirement funds. This could involve a direct rollover into an IRA or payment in installments, depending on the specific terms of the QDRO.
What Happens If a QDRO is Not Filed?
If a QDRO is not filed properly or at all, the retirement benefits may not be divided as ordered by the court. This can create significant financial difficulties for the spouse entitled to a share of the retirement benefits. In some cases, the non-employee spouse may need to seek legal recourse to enforce the terms of the divorce settlement or judgment.
Conclusion
Filing a QDRO is an essential step in dividing retirement benefits in a divorce, but the process can be complex and requires attention to detail. While the who is responsible for filing a QDRO typically falls to one of the spouses’ attorneys, it is important for both parties to be involved and ensure that the order is processed properly. Working with an experienced attorney who understands the intricacies of QDROs can help ensure a smooth and timely division of retirement assets, providing financial security for both parties moving forward.
Filing a QDRO: Who Handles the Process and What You Need to Know