An actuarial report determining the lump sum value of marital benefits is a common approach. However, sometimes circumstances make it impractical to trade the value of the pension for some other marital asset. In those instances a QDRO often is the only practical alternative. That is, a Qualified Domestic Relations Order, a judgment directing the plan’s administrator to split the pension payments at retirement between the parties.
A QDRO typically is drafted by an attorney and contains the names and addresses of the parties, the benefit awarded to the alternate payee, and the number of payments or time to which the order applies. A QDRO is limited to the types of benefits provided by the plan and may not pay to the alternate payee benefits which were previously awarded under a prior QDRO to a different alternate payee. The essence of the QDRO requirements is contained in §414(p) of the Internal Revenue Code and regulations supporting it.
We can draft a QDRO for review by an experienced attorney. In other instances we can review a QDRO already drafted. Either way, the objective is wording which accomplishes three things simultaneously:
- Compatible with the actuarial value of the marital assets
- Consistent with the formal requirements of federal (and sometimes state) law
- Based on the terms of the plan’s legal document.
You can find out more about QDROs from the Department of Labor’s FAQ here.