What is a Qualified Domestic Relations Order in a New York Divorce?
When you divorce, all property that was acquired during the marriage is split between the spouses in an equitable manner. This includes retirement accounts that have accrued value during the marriage. Of course, you can’t raid a retirement account without facing penalties, so how does the retirement account get divided during the divorce? The answer is: A Qualified Domestic Relations Order or QDRO.
What is a QDRO?
A Qualified Domestic Relations Order (QDRO) is a court order entered as part of the distribution of assets during a New York divorce. The QDRO divides retirement accounts as part of the equitable distribution of the marital estate. Once the QDRO has been accepted by the plan administrator, it will establish each party’s entitlements and ownership of the retirement plan to provide each party with their respective share of the account. A QDRO is an essential tool for ensuring that retirement benefits are properly divided in accordance with the terms of the divorce agreement.
How does the QDRO determine each party’s share?
This can become complicated. All the contributions made during the marriage are technically considered property of the marital estate. This means that the value the retirement plan accrued during the marriage is subject to equitable distribution. In other words, some portion of your retirement plan must be split with your spouse. A QDRO is the means by which the plan can be accessed without incurring financial penalties related to early disbursal.
What types of accounts is a QDRO used for?
QDROs are specifically used for retirement plans covered by the Employee Retirement Income Security Act (ERISA). These include:
- 401(k) and 403(b) plans – A 401(k) is an employer-sponsored defined-contribution plan where employees make contributions from their paycheck either before or after their income is taxed. A 403(b) plan is similar to a 401(k), but it is only available to government employees or non-profit organizations.
- Pension plans – A pension plan is a retirement plan that provides a specific payment at retirement.
- Profit-sharing plans – A plan where employees receive a share of the company’s profits.
- Annuities – Annuities including TIAA CREF accounts are distributed by means of a QDRO.
QDROs are generally not used for IRAs (Individual Retirement Accounts) or other government retirement plans such as the Federal Thrift Savings Plan (TSP). Similar orders are used for these types of plans.
The bottom line
If you are currently engaged in a divorce and have significant retirement accounts, you will want to discuss the matter with your attorney. You will need an experienced family law attorney to help you draft a QDRO and ensure that your retirement accounts are split correctly. If not done correctly, the QDRO can be rejected by the plan administrator resulting in significant delays and headaches. Our attorneys are here to help.
Talk to a Westchester County, NY Divorce Lawyer Today
The Law Office of Robert S. Sunshine represents the interests of divorcing couples in Westchester County. Call our Westchester County family lawyers today to schedule an appointment, and we can address any concerns you may have.
