Dividing retirement and pension at the time of divorce can be a complex issue. The family court may allow the person with the pension to retain the full pension. And offset other marital assets against it. Instead, the court may distribute a portion of each pension payment to the plan participant and an alternate payee by utilizing a Qualified Domestic Relations Order (QDRO).

Qualified Domestic Relations Order

A QDRO allows a retirement plan administrator to make payments directly to the spouse instead of having payments be made to the retiring spouse. Typically, pension plans restrict payments to one person with no option for assignment or alienation, and tax consequences attach to payments made to anyone other than the person who earned the pension. However, QDROs permit this exception because pensions are martial property subject to division upon divorce.

Best Practice in Drafting QDROs

A court order must be qualified or approved by the plan or plan administrator before it is a QDRO. The best practice is to consult an attorney competent in drafting QDROs, as the IRS requires specific information for plan administrators to recognize and effectively transfer. Consulting a CPA with experience in private retirement funds can also ensure plan approval.

Approval of a QDRO can take a long time. The retirement plan must establish reasonable procedures to determine a QDRO’s qualification and administer distribution. Upon receipt of a proposed QDRO, the plan must notify the participant and payee of their procedures. Moreover, the order must be determined to be a QDRO.

Tips for QDRO

Be careful to ensure the QDRO addresses any other benefit entitlements beyond the payment of cash such as qualified joint and survivor annuity benefit or qualified pre-retirement survivor annuity.

A QDRO is normally for non-governmental retirement plans. South Carolina State retirement pensions require a QDRO by state statute. Yet the Federal Employee Retirement System is not subject to QDRO rules. Military retirement benefits are not pension plans and require specific language in a family court order to effectively provide payments to a former spouse.

Ensure you retain an attorney who understands your unique divorce needs.
Spartanburg Family Lawyer, Spartanburg Divorce Lawyer

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