Many employees put money into their retirement plans throughout their careers. This can result in thousands of dollars saved for their retirement. When a couple marries, they expect that their retirement accounts will be able to support a single home.
Retirement accounts can become a great source of stress when a couple divorces. Unless both parties have their retirement accounts and those accounts are roughly equal in value, the accounts have to be divided. Retirement plans covered by the Employee Retirement Income Security Act, including 401(k) accounts, need to have a qualified domestic relations order.
1. A QDRO must be ordered by the court
The court has to order the QDRO, but it must be prepared by one of the attorneys in the case. It has to list all the identification information for the plan and both parties. It must also include the exact terms of the distribution.
2. The plan administrator’s approval is required
The QDRO must be approved by the plan administrator. If it isn’t, it will be returned to the court for correction. This makes it important to be sure that you have everything done correctly.
3. There are limitations to orders
A QDRO can’t order anything that’s not part of the retirement plan. There can’t be any increase in future benefits that are based on actuarial value. Additionally, if a plan already has a QDRO from a previous divorce, the earliest QDRO takes priority.
Working out the terms of your divorce can be challenging. Each marital asset needs to be accounted for in the split. This can be challenging if you have complex assets, but having someone on your side can make this easier because you can draw from their knowledge.