For many married couples, one of the largest assets is a retirement plan. Although a spouse has a right to a share of the benefits earned during marriage in a retirement plan, these rights may be forfeited in a divorce proceeding if a Qualified Domestic Relations Order is not entered in the divorce case.
Peggy A. Roston represents clients in all aspects of divorce law and has extensive experience preparing domestic relations orders as part of the settlement process. Peggy is well versed in the applicable federal laws governing private pension plans, Alaska’s marital and domestic relations law, as well as the rules related to retirement plans for public employees and members of the armed services.
What is a Qualified Domestic Relations Order?
Generally, a domestic relations order is a court order, which divides marital retirement benefits. A Qualified Domestic Relations Order (QDRO) is a specific type of court order applicable to private retirement plans, which are subject to the Employee Retirement Income Act (ERISA). A qualified plan may be a defined benefit plan, which pays the participant a monthly annuity for life, or a defined contribution plan such as a 401(k), which is a tax-deferred savings account with employee and in some cases employer contributions. Thus, a QDRO awards a former spouse a portion of the participant’s retirement benefits that were earned through his or her participation in an employer-sponsored retirement plan. In Alaska, state and teacher retirement benefits are also divided by QDRO’s. Federal and military retirement benefits are also subject to division in a divorce, but the orders dividing these benefits are not called QDRO’s.
How is a QDRO Prepared?
While QDRO forms are available from plan administrators, Peggy has the knowledge and skill that are necessary for preparing an order that the retirement plan administrator will accept and which favors her client. She understands that because a QDRO can be written to favor one party over the other party and that an attorney writing a QDRO should not blindly adopt the form from the plan administrator.
Generally, a QDRO must contain the following information:
- The names and addresses of the participant and alternate payee
- The name of the plan from which the benefit is being transferred
- The amount or percentage of the benefit to be paid
- The method for calculating the amount or percentage
- The number of payments or time period covered by the order
- In a QDRO, the spouse who earned the benefit is known as the participant, while the person who is awarded a share of the benefit is referred to as the alternate payee.
Although the court can issue a domestic relations order, it does not become “qualified” until it has been accepted by the plan administrator. Moreover, each plan is different and typically requires specific language to be included in the QDRO. The order must be signed by the presiding judge. If the plan administrator rejects the order, a new order will need to be filed with the court, and resubmitted for approval by the plan.
While retirement benefits are considered marital property that is subject to division in Alaska, there are limitations. For example, the participant must be vested in or receiving the benefits on the date the divorce is filed. Under the terms of some plan documents, the alternate payee cannot receive his or her share of the benefits until the participant begins receiving benefits. The State of Alaska PERS is an example of this type of pension plan. On the other hand, under the terms of other plan documents, a court can enter what is known as a separate interest QDRO. Under a separate interest QDRO, the alternate payee is eligible to begin receiving payments when the participant becomes eligible to retire – even if he or she does not retire or has reached the age of 65, whichever comes first. These are just two examples of the differences between pension plans. In short, it is imperative to have an attorney with knowledge of and experience with multiple private and governmental retirement plans.
In addition, some plans charge a fee for processing a QDRO, which can either be included in the overall fees assessed to the plan or passed on to the alternate payee. Finally, while the payout from a QDRO can be rolled over into another retirement plan tax-free, there will be tax consequences once distributions are taken from the rollover account.
Experienced QDRO Attorney
In order to ensure you receive a share in a former spouse’s retirement plan, it is crucial for the court to enter a QDRO or other applicable order separate from the divorce decree. For over twenty-six years, Peggy Roston has provided advice and counsel to clients on a wide range of family law matters. Peggy is well versed in the rules regarding the division of pension benefits for private and public employees and members of the military. Because going through a divorce is a complicated and difficult process, it helps to have an attorney by your side who is dedicated to protecting your financial future.
Located in Anchorage, Law Offices of Peggy A. Roston serves clients in Fairbanks, on the Kenai, in the Mat-Su Valley and throughout the state of Alaska. Contact Peggy to get legal representation for all of your family and divorce law needs.