What Is a QDRO?

Many Americans own significant pension and retirement savings assets.

In divorce, the division of marital assets is generally governed by state domestic relations law, any division of retirement interests must also comply with federal law.  The two federal laws in question are the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code of 1986 (“Code”). Under ERISA and the Code, retirement interests may be divided only if the judgment, decree, or order creating or recognizing a spouse's, former spouse's, child's, or other dependent's interest in an individual's retirement benefits constitutes a "qualified domestic relations order" ("QDRO").

Each financial institution has its own preferred form of QDRO, all of which are based on a federal model form.  In dividing retirement assets subject to ERISA, one must acquire and complete the form of QDRO preferred by each financial institution holding a party’s retirement assets.  One submits completed QDROs to the court for approval, and then submits the executed QDROs to the financial institutions.  Upon their review and approval, one receives a letter from each of them acknowledging their QDRO and describing the revised ownership interest in the retirement asset.