Understanding QDRO in Texas Divorce Law
If you are in the midst of a divorce, or are researching the steps to obtaining a divorce in Texas, you may have heard about a “QDRO.” This acronym stands for Qualified Domestic Relations Order. This order separates and transfers a retirement plan between you and your soon-to-be-ex-spouse. This order is often necessary before an employer’s pension plan administrator will agree to divide a retirement package between two people.
How a QDRO Works
There are two essential elements of a QDRO. First is the domestic relations order. Second is the qualification. A Texas judge typically issues the order under the domestic relations law of the state. This will occur during the property settlement phase of the divorce process. This order effectively assigns a property interest you have in your 401(k) to an alternate payee.
Different Types of QDROs for Different Types of Retirement Plans
There is no uniform QDRO that can be used for any and all retirement plans. That is because each plan is different and carries a unique set of rules relating to such orders. This includes corporate retirement plans, military retirement plans, state and federal government retirement plans, etc. Though, some employers (especially large employers with HR Departments) will have a standard form you can access and fill out.
Important QDRO Limitations
It is important to understand that a domestic relations order cannot create new benefits or increase benefits for the plan participant or the alternate payee. It also cannot modify plan rules or create different vesting or distribution schedules under the plan. The order must comply with all rules and regulations associated with the benefit plan.
QDRO and ERISA
When a QDRO is entered and it relates to an employee benefit covered by ERISA (Employee Retirement Income Security Act of 1974), the plan administrator must qualify it before any segregation can occur. The order becomes qualified (that’s where the Q comes from in QDRO) when it meets all ERISA requirements. For example, the order needs to identify the participant, the alternate payee, the plan, the time period for which it applies and the dollar amount or percentage that is to be divided between the parties.
Qualifying an Order Takes Time
Unfortunately, getting a domestic relations order qualified under an ERISA employee benefit plan is not a quick process. In fact, it can take well over a year before the order is qualified and goes into effect. This because if a mistake is made in drafting the domestic relations order, a plan administrator has the authority to reject the order and send it back for further modification.
Once a QDRO goes into full effect, the plan administrator will then segregate the benefits and give the alternate payee access to their portion of the benefits.
Speak to a Houston Divorce Lawyer Today
As you can see, the divorce process can get complicated if you and your spouse has significant assets and multiple retirement plans through an employer. We can help. The Houston divorce lawyers at Lindamood & Robinson, P.C., have years of experience and are fully capable of guiding you through a complicated divorce process.