WHAT IS A QUALIFIED DOMESTIC RELATIONS ORDER?
A qualified domestic relations order (QDRO) is a court order that orders a retirement plan administrator to pay some or all of an employee’s retirement benefits to that employee’s former spouse. For example, if a divorcing couple agree to divide the wife’s 401(k) plan then they will need to submit a QDRO to the 401(k) plan administrator detailing how that division should occur.
DO I NEED A QRDO?
QDROs are part of the regulatory structure of The Employee Retirement Income Security Act of 1974 (ERISA). Therefore, any plan that is subject to ERISA will require a QDRO to divide a participant’s plan account. These plans include both defined benefit plans (traditional pension plans paying an annuity upon retirement), defined contribution plans (401(k), 457(b), 403(b) plans), and cash balance pension plans. Individual Retirement Accounts (IRAs) do not require QDROs to be divided and can be divided by completing the appropriate forms required by the plan administrator.
CAN EVERY PLAN BE DIVIDED WITH A QDRO?
It is not safe to assume that all retirement benefits are divisible at the time of divorce. Many companies provide “non-qualified” retirement benefits to their highly-compensated employees. These plans often have names like “supplemental,” “non-qualified,” “excess benefit,” or “SERP.” Generally, these types of benefit plans are not subject to ERISA and, therefore, cannot be divided by a QDRO. Similarly, under Georgia law, certain governmental retirement plans, for example, the Georgia State Teachers Retirement Plan and the Employees’ Retirement System are not required to accept QDROs.