We draft some QDROs for clients still in the divorce process, some for clients who have been divorced for over twenty years, and the majority for clients within two years of their divorce being finalized. When is the best time to file a QDRO?
Ideally, a qualified domestic relations order (QDRO) should be prepared and filed concurrently with the dissolution judgment. By filing a QDRO concurrently with the judgment, both parties can have the peace of mind that all issues are settled, instead of finding out months or years later that the marital settlement agreement or judgment did not address all QDRO issues in sufficient detail, so additional negotiation and litigation may be necessary.
Without a QDRO in place, the non-employee spouse risks:
- Losing all of his/her benefits if the employee spouse dies
- Losing his/her rights if the participant takes disability retirement instead of a longevity retirement
- Losing pre-retirement survivor annuity benefits
- Losing survivor benefits if the employee spouse remarries
- Losing other available survivor benefits
- Losing the option to elects a separate interest in a defined benefit plan
- Losing rights to a coverture-based pension
- Losing his/her share of early retirement subsidies and cost of living adjustments (COLAs)
- Missing months or years of pension payments if the participant retires unbeknownst to the non-participant spouse
- With regard to 401(k) plans: losing investment gains on 401(k), losing his/her entire share if participant quits and takes distribution, losing rights to name beneficiary upon his/her own death, and losing the right to direct investment for his/her own share of the benefits.
If parties delay filing a QDRO, they can also encounter difficulty if the employer sponsoring the retirement plan is liquidated, merges with another company, is acquired by another company, or even if the employer hires a new third party to act as administrator of the plan.
For all of the reasons listed above, and due to the unpredictability of life events, it is the best practice to get your QDROs drafted before the divorce is finalized. If that is not an option, QDROs should be prepared as soon as possible after the judgment for dissolution is entered.
If you would like to get started on your QDRO today, please call (619) 786-QDRO or email QDRO Helper at firstname.lastname@example.org. You can also download all the required forms by clicking on our forms page.
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