A Qualified domestic relations order or QDRO is a legal order subsequent to a divorce

Divorce

Divorce is the final termination of a marital union, canceling the legal duties and responsibilities of marriage and dissolving the bonds of matrimony between the parties...

 or legal separation that splits and changes ownership of a retirement plan to give the divorced spouse their share of the asset or pension

Pension

In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...

 plan. QDROs may grant ownership in the participant's (employee's) pension plan to an alternate payee, who must be a spouse, former spouse, child or other dependent of the participant. A QDRO may provide for marital or community property division between the participant and the alternate payee, or for the payment of alimony or child support to the alternate payee. QDROs apply only to employee benefit or pension plans subject to ERISA, the Employee Retirement Income Security Act, the American law governing private sector pensions. Comparable types of orders are available to divide military retirement pay and Federal civil service retirement plans, and for State, county and municipal retirement plans in most States. QDROs must first be entered by the State domestic relations court and then reviewed by the plan administrator for compliance with ERISA or other applicable law and the terms of the plan. The QDRO may be a separate document or it may be part of the divorce decree as long as it meets the standards for a qualified domestic relations order.

Definition

A Qualified Domestic Relations Order is a domestic relations order which creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a qualified Plan (i.e. employer sponsored).

A domestic relations order is any judgment, decree, or order (including approval of a property settlement agreement) which (1) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (2)is made pursuant to a State domestic relations law (including a community property law).

An Alternate Payee must meet the definition of alternate payee - any spouse, former spouse, child or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.

These Orders do not relate to Plans not covered by the Employee Retirement Income Security Act of 1974 (“ERISA”). Examples of retirement accounts NOT covered by ERISA include State and Municipal retirement plans, Federal Retirement Plans (CSRS, FERS & TSP), IRA's (SEP, SIMPLE and Keogh), and most Deferred Compensation plans.

Value of the distributive award

There are several methods of determining of each party’s share of the fund. One of the relevant factors is whether or not the participant was already enrolled in the Plan prior to the marriage.
If Plan participation post-dates the marriage, each party’s share is (usually) 50%* of the fund’s value as of the date of the commencement of the divorce action, execution of a stipulation of settlement agreeing to the distribution, or entry of the divorce judgment (whichever date is earliest).

If Plan participation pre-dates the marriage, the usual method in New York State (others may be similar) is the “Majauskas” formula (Majauskas v. Majauskas, 61 NY2d 481, 491-492). A distributive ratio is established by dividing the duration of Plan participation (in months) by the duration of the marriage only while a member of said plan (in months). Both terms end as of the date of the commencement of the divorce action, execution of a stipulation of settlement agreeing to the distribution, or entry of the divorce judgment (whichever date is earliest, as above). The non-participating party’s share is (usually) 50% of the resultant fraction of the fund, the balance being retained by the participant.

Requirements for the Order

The proposed (un-signed) Order must comply with three general sets of rules:

• State domestic relations law. Requirements may vary widely by state. For example, in New York
  New York
  New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
  
  : DRL §236; the distribution must be “equitable” (fair).
• U.S. tax code
  Internal Revenue Code
  The Internal Revenue Code is the domestic portion of Federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code...
  
  ; preservation of the tax deferred status of the funds is the responsibility of the movant.
• The Employee Retirement Income Security Act (ERISA) contains requirements that are essentially parallel to those in the Code. Among such requirements is that the method of distribution must be selected from among the options available to the Participant, according to the terms of the Plan. The participant may not order the Plan to distribute the money in a manner not consistent with the Plan's terms.

All QDROs must contain certain data:

• Full Name, and Last Known Mailing Address of the Participant, Employee or Contributor (also referred to as the "Payee" or "Distributee"), and Spouse (or "Alternate Payee", etc.)
• Social Security Number
  Social Security number
  In the United States, a Social Security number is a nine-digit number issued to U.S. citizens, permanent residents, and temporary residents under section 205 of the Social Security Act, codified as . The number is issued to an individual by the Social Security Administration, an independent...
  
  s of both Parties
• Formal name of the Plan
• Participant’s Plan Identification Number (if different from the Participant’s Social Security number)
• The amount payable Alternate Payee, or the method to be used to calculate such amount
• For a defined benefit plan, the duration the benefits are payable to the Alternate Payee

External links

• http://www.dol.gov/ebsa/publications/qdros.html - Extensive information from the Department of Labor
  United States Department of Labor
  The United States Department of Labor is a Cabinet department of the United States government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, re-employment services, and some economic statistics. Many U.S. states also have such departments. The...
  
  
• http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000414----000-.html - Section 414 of the Internal Revenue Code.