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How a QDRO could affect your divorce and retirement

When you are just starting the divorce process, it is easy to become overwhelmed by the sheer number of unfamiliar terms that you encounter on a daily basis. Collaborative law, mediation, spousal support, equitable division and parenting time are all common (and often-confusing) legal family law phrases, to name a few of many.

One such unfamiliar divorce term is “Qualified Domestic Relations Order,” which is most commonly referred to by its acronym, QDRO. Formally, a QDRO is a judgment or order that formally approves a property settlement agreement that involves a retirement plan in some way.

In short, a QDRO is an order that allows for money to be collected from a retirement from someone other than the holder of that account. Courts often order QDROs to allow former spouses or children to collect spousal or child support by taking money from retirement accounts, when the payor spouse or parent has no other way of paying. One positive aspect of the orders is that transfers from a retirement account under a QDRO will not incur an early-withdrawal penalty.

A QDRO is required if the court order includes any funds covered by the Employee Retirement Income Security Act, or ERISA. The plan administrator must approve the order, but this is not usually an issue – in fact, many plan administrators provide QDRO forms that accountholders can fill out.

However, there are some requirements in order for a QDRO to be approved. It must include several identification details, including the name and known address of the accountholder and the person who will be withdrawing funds and the amount that will be paid from the plan to that person.

Source: Reuters, “What Is a QDRO? How Divorce Affects Retirement,” Andrew Chow, April 19, 2012