This article will discuss:
- What are Qualified Domestic Relations Orders (QDROS)?
- What are alternate payees?
- What are the requirements of QDROS?
- What may not be in QDROS?
- How does IPERS treat QDROS?
What are Qualified Domestic Relations Orders (QDROS)?
Qualified Domestic Relations Orders, or QDROs (pronounced “quadros”) are Court orders entered in domestic relations cases. This kind of Order allows an “alternate payee,” usually the other spouse, all or part of the beneficiary’s retirement account, without negative tax consequences. To be a QDRO, the order must arise in a domestic relations order, and relate to the provision of child support, spousal support (alimony), or marital property rights. So, if you or a spouse has a pension, 401k, or other kind of retirement account, a QDRO is probably necessary.
While the alternate payee is usually a spouse, it can also be a former spouse, child, or other dependent of a participant. QDROs are not always necessary, if the parties are able to come to an alternative
Is a QDRO necessary to receive part of my spouse’s retirement plan?
In Iowa, a QDRO is necessary to receive a portion of a spouse’s retirement plan. Mere mention of a specific dollar amount in a stipulation or divorce decree will not be enough to obtain this property. If a party has multiple retirement accounts, they may each be part of the same QDRO.
Does a QDRO need to be part of a divorce case?
However, a QDRO may be part of a divorce decree or property settlement. There is nothing which requires a QDRO to be part of a separate instrument. However, a QDRO does not need to be issued in a divorce proceeding. It could also be a part of a domestic relations order that provides for child support or recognizes marital property rights. To be enforceable, the elements listed below must be in the order.
What must be included in a QDRO for a plan through and employer, or a 401k?
QDRO law is governed by state and federal law. On a federal level, the Employee Retirement Income Security Act of 1974 (ERISA) contains a list of criteria which a domestic relations order must contain to qualify as a QDRO. These requirements apply to plans through employers (including 401ks), but not government plans (like IPERS).These factors include:
- The name and last known mailing address of the participant and each alternate payee
- The name of each plan to which the order applies
- The dollar amount or percentage (or the method of determining the amount or percentage) of the benefit to be paid to the alternate payee
- The number of payments or time period to which the order applies.
The Department of Labor also lists several other requirements a QDRO must not contain.
- It must not require a plan to provide an alternate payee or participant with any type or form of benefit, or any option, not otherwise provided under the plan
- It must not require a plan to provide for increased benefits (determined on the basis of actuarial value)
- The order must not require a plan to pay benefits to an alternate payee that are required to be paid to another alternate payee under an order previously determined to be a QDRO
- The order must not require a plan to pay benefits to an alternate payee in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her subsequent souse.
QDROs can occur after one of the parties’ death, provided the above elements are met. The same is true of a subsequent domestic relations order between different parties which requires a portion of the participant’s unallocated benefits go to a different payee, or a domestic relations order requiring a portion of an annuity benefit to go to a party . This payment may also go to the guardian of an alternate payee. However, an order issued in a probate proceeding after a party’s death is not a QDRO because it does not relate to a qualifying domestic relations order. Certain plans will have requirements you and your attorney will have to comply with.
What is a plan administrator’s role?
The plan administrator will determine whether an order is a QDRO. These administrators are trained to determine whether the order qualifies as a QDRRO, and is required to follow the plan’s procedures for making QDRO determinations. The United States Department of Labor views these administrators as having the primary authority to determine QDROs, going so far as to say state Courts do not have jurisdiction to determine whether they qualify as QDROs. However, a judge must still sign the QDRO. Government plans like IPERS also have administrators which make these decisions.
How Do QDROS Work when One Spouse Benefits From IPERS?
The Iowa Public Employee’s Retirement System, more commonly known as IPERS, is the largest pension fund in the state with over 350,000 members. There are special provisions for persons receiving benefits from IPERS. IPERS is a defined benefit retirement plan, using a formula to determine benefits for a retiree.
IPERS is NOT subject to the ERISA provisions listed above.
The alternate payee does not receive benefits payments until the other party retires. If the beneficiary is already retired, the alternate payee receives a share of the benefit after IPERS qualifies the QDRO. It is two payments from the same account.
IPERS provides Pre and Postretirement Instruction Packets suggesting three methods of dividing the benefits, the straight percentage method, the service factor method, and the sum certain method. An attorney may be able to provide valuable advice on which method is correct for you.
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