Do You Need a Qdro to Split Your Retirement Plans?

Many baby-boomers in Illinois continue to get divorced at a high rate. Baby-boomers considering divorce or those currently going through divorce have several considerations to make, especially when it comes to splitting their assets.

Dividing your assets and property during divorce can be a difficult experience, especially when splitting your retirement account comes up. Many spouses don’t want to think about their ex receiving assets from their retirement account that they contributed to throughout their career. Despite the pain associated with dividing assets, it is an important process during divorce so it is best to be prepared.

Dividing retirement assets can be a little tricky depending on the types of retirement accounts a spouse has. Some retirement accounts may require a Qualified Domestic Relations Order to distribute the funds of the retirement account. Other accounts will not require this document.

So which retirement accounts need a QDRO? Retirement accounts that are covered by the Employee Retirement Income Security Act need a QDRO. This typically includes pension plans, 401Ks, 403bs, employee stock options and other employee offered plans require a QDRO. IRAs do not require a QDRO as well as government retirement plans and some deferred plans.

A QDRO states how the retirement assets will be divided and how they will be distributed after the divorce. QDROs have to be approved by the divorce court and the administrator of the retirement plan before any assets will be distributed.

Dividing retirement assets can be complex, and not having a QDRO when you need one can result in a spouse not receiving their share of retirement assets. This can result in a longer and costlier process during the divorce so it is best to be prepared and know if you need a QDRO before your retirement assets are divided.

Source:¬†The Star-Ledger, “Spliltting a retirement plan after divorce,” Karin Price Mueller, Jan. 26, 2014