You say Q-D-R-O, I say Quadro…
In this blog, it is pointed out that Jerry Rice and his wife are divorced, though the economic issues have yet to be resolved. This same posting gives a very good and very simple explanation of what a “bifurcated divorce” means. The blog also mentions that Mr. Rice and his ex-wife have also had the appropriate QDRO’s or Qualified Domestic Relations Orders entered. Depending on where you live in Pennsylvania, you may pronounce the abbreviation of this phrase either by its letters “Q-D-R-O” (pronounced cue dee are oh) or as a single word pronounced quadro. No matter how you say it, it is still the same thing.
A qualified domestic relations order is generally the type of order that is necessary to divide certain retirement benefits. When parties are going through a divorce and there are retirement benefits to be divided, it may be necessary to have a QDRO prepared and signed by a judge in order to effectuate the division of the retirement account. Usually, the QDRO calls for a specific percentage or specific dollar amount of one party’s retirement account to be separated from the account and placed into a new account either with the same plan or with a plan designated by the other party. If a new plan is not designated, then the funds are placed into a retirement account with that same plan. So the person who is the recipient of the retirement benefits becomes a participant in that company’s retirement plan without having to work at the job.
The usual steps for the entry of a QDRO are as follows:
1. A determination has to be made by agreement of the parties or by the court as to how the retirement benefits are to be divided.
2. Someone finds out from the benefits person managing the retirement account what forms the company prefers to divide a retirement account.
3. The necessary forms are then prepared by an actuary or sometimes an attorney.
4. The forms are then sent to the plan administrator for pre-approval.
5. Any changes, corrections or clarifications are made to the form.
6. Once pre-approved, after a divorce decree is entered, the form is sent to the appropriate judge for approval of the order dividing the retirement benefits.
7. Once it has been signed by a judge, it is sent to the plan administrator again for final approval and implementation.
This method for division of retirement benefits is most helpful when one party to a divorce has little to no retirement benefits in his or her own name.
Some retirement benefits can not be divided by a QDRO, but must rely on the entry of a DRO or Domestic Relations Order. From a practical perspective, i.e. the perspective of the person whose retirement benefits are being divided and the perspective of the person who is receiving the retirement benefits, the difference is minimal. Of course, if I am over-simplifying things, please let me know.