Alternate Payee – For purposes of a qualified domestic relations order, the term Alternate Payee refers to a spouse, former spouse, child, or other dependent of a participant.

Domestic Relations Order – The term domestic relations order refers to a judgment, decree, or order (including the approval of a property settlement agreement) that is made pursuant to state domestic relations law (including community property law) and that relates to the provision of child support, alimony payments, or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of a participant.

Participant – The term Participant refers to the individual who participates or is covered by a retirement or pension plan. The Participant is the individual (a spouse or former spouse) whose retirement benefits are being divided and assigned to his or her spouse or former spouse pursuant to a divorce decree or a property settlement agreement.

Plan Administrator – The term Plan Administrator refers to the person or more typically the company that manages the administrative aspects of a retirement or pension plan. Usually, the employer that sponsors the plan also acts as the plan administrator. However, it is not uncommon for employers to delegate the administrative duties related to the plan to a third party, such as a company or organization specialized in plan administration.

Qualified Domestic Relations Order – The term qualified domestic relation order refers to a domestic relations order that creates or recognizes the existence of an alternate payee’s right to receive, 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 pension plan, and that includes certain information and meets certain other requirements.

Welcome to QDRO Center! The purpose of this blog is to spread the word on the importance of Qualified Domestic Relations Orders (QDROs, pronounced “kwa-dro” or “Q-dro”) . A QDRO is a legal document required by plan administrators to honor the division and assignment of a participant’s retirement benefits to his or her former spouse (commonly known as the “alternate payee”). When the participant’s retirement benefits have been divided in connection with divorce proceedings (e.g. by a divorce decree or a property settlement agreement), the purpose of a QDRO is to secure the right of the “alternate payee” to all or a portion of the participant’s benefits. To effectively secure this right, it is essential that a domestic relations order be prepared and presented to the administrator of the retirement plan in question for approval as soon as the marriage is dissolved.

Unfortunately, it’s still very common to see that in many cases, after the court enters a divorce decree assigning a participant’s benefits to his or her former spouse, nothing else is done to secure the future payment of the assigned benefits. Usually, divorce lawyers and spouses or former spouses who would qualify as an alternate payee under a QDRO mistakenly believe that a domestic relations order need not be prepared right away when payment of the assigned benefit is not due (or going to be demanded) for a few years. However, it is this omission what puts at risk the assigned benefit. When a domestic relations order is not prepared and submitted immediately for approval, the benefit assigned by the divorce decree is at risk. The risk is in that the administrator of the plan is not aware that the participant’s benefits have been divided or completely assigned to his or her former spouse and therefore may pay out all the benefits to the participant and leave the alternate payee without benefits. From the time the divorce decree is entered and until a domestic relations order is submitted for approval, the retirement plan administrator, not knowing that the former spouse was entitled to a portion or all of the participant’s benefits, could have paid out all benefits to the participant.

This blog is to provide general information about QDROs, the importance of their timely preparation and submission for approval, and tips on what family law attorneys and their clients may or should do to protect the assignment of retirement benefits.