What is a QDRO? A Qualified Domestic Relations Order (QDRO) is a special legal document that the IRS and DOL recognizes as a method of allowing the tax-free transfer of retirement plan assets to a non-participant spouse and/or dependant(s) pursuant to a divorce and is made in accordance with state domestic relations law. The QDRO was created by the Retirement Equity Act of 1984 as an amendment to the anti-alienation provisions of the Employee Retirement Income Security Act of 1974 (ERISA), which protected retirement plan assets from creditors. A retirement plan will not divide benefits or provide for payments without an approvable QDRO.

During settlement negotiations, if a retirement plan is to be divided, a QDRO must be drafted and submitted to the retirement plan administrator to affect a division of retirement plan assets, per the agreed settlement. The whole host of different retirement plans coupled with each plan’s unique interpretation of the QDRO regulations presents challenges in effectively and efficiently drafting and submitting the QDRO to the plan administrator for pre-approval and then implementation. Rejection of the QDRO by the plan administrator leads to extra time and costs.

A poorly drafted QDRO can nullify or reduce benefits, fail to allow for proper distribution options or investment flexibility and fail to account for future contingencies that may occur such as; early retirement, Cost of Living Adjustments (COLAs), subsidized benefits, remarriage and premature death or disability.

As a former Plan Administrator for over 15,000 plans held at a major U.S. custodian, where Thomas Toxby handled the review and approval process for QDROs served on those plans, we know how to properly structure the language and articulate plan benefits properly for speedy approval from the plan.

Toxby & Associates, Inc. charges a flat fee of $500 for each QDRO, be it for a Defined Benefit plan or Defined Contribution plan. Our complete solution to drafting services includes:

• Drafting the QDRO within a few business days and providing copies to all parties.

• Submission to the Plan Administrator for pre-approval of the QDRO (when offered by the plan) and any revisions that may be required to achieve approval with the plan.

• Availability to discuss the QDRO process and answer questions at any point with the divorcing parties and/or their counsel.

• Along with the final QDRO to be signed and filed with the court and served on the plan, we will include a letter of instruction for submission of the certified court copy to the plan administrator for action/implementation.

Settlement/Separation Agreement Language

Our experience with retirement plans can also be utilized for Retirement Plan and Pension analysis, a key component in the Discovery process, to fully quantify the retirement assets and clarify payout and benefit options, so that the Marital Settlement Agreement sections regarding retirement plans and survivor benefits are documented properly to fully represent the intent of both parties.  We can draft the provisions in the Settlement Agreement that relate to the division of the retirement plans to insure that the subsequent QDRO will be backed up with an “airtight” Settlement Agreement, as disputes over a QDRO or division order always fall back to the language in the original Settlement Agreement.