Is There a Time Limit to File a QDRO?

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Is There a Time Limit to File a QDRO?

Generally speaking, a spouse or ex-spouse may file a QDRO with the court, or request the court’s signature on a QDRO, any time during or after a divorce. To be more precise, federal law does not contain a time limit for filing a QDRO, though there may be legal or procedural arguments under the divorce laws of a particular state that make it difficult if you or your attorney makes the request long after the divorce.

Although you may file a QDRO at any time, there are inherent risks with waiting to file a QDRO, jeopardizing the ability of the receiving spouse (the alternate payee, or “AP”) to obtain all the benefits he or she is fairly entitled to under the divorce laws of a particular state. To put this last point another way, under divorce law, the AP is likely entitled to half of any retirement benefits earned during the marriage, however, you may not end up with your share of these benefits if the delay in drafting the order and having it qualified by the retirement plan is too long. For these reasons it’s best to use the QDRO services of an attorney experienced with ERISA’s QDRO requirements early in the divorce process or, if the divorce is final, as soon as possible after it is final. Nevertheless, whenever an ex-spouse realizes she or he may need a QDRO, it is best to pursue drafting and having it qualified as soon as possible.


Filing a QDRO After Divorce

Most divorce attorneys believe that they must have a judgment of divorce to obtain a QDRO, and therefore do not begin the QDRO process (if they begin it at all) until the divorce is final. But that is a common misunderstanding: the federal law that governs QDROs, ERISA, does not require a judgment of divorce for a QDRO. In fact, even a settlement agreement may operate as a domestic relations order if it contains the information required by ERISA.

But if the divorce is final and the domestic relations order (DRO) was never drafted, the DRO can—and should—still be drafted and filed with the plan and the court as soon as possible. The steps for doing so are basically the same as they would be during the divorce process, with one important exception (notifying the plan). In very simplified terms, a QDRO attorney should:

  • Obtain the specific information about the retirement plan;

  • Review the language of the separation agreement dividing the benefits;

  • Draft the order;

  • Provide it as soon as possible to the retirement plan administrator, on notice to the other spouse or his or her attorney;

  • Submit it to the retirement plan for pre-approval;

  • Once pre-approved, submit the order to the court for filing and signature, on notice to the other spouse or his/her attorney and, most importantly;

  • Submit it to the retirement plan for “qualification” so that your DRO becomes a “QDRO.” Without this final step, you are not entitled to your share of the retirement benefits no matter what your divorce documents say.

Obstacles to Completing the DRO After the Judgment of Divorce Is Final

What types of obstacles will you run into if you try to take these steps after a divorce is final?

Requesting Retirement Plan Information: the plan administrator often (incorrectly) denies the AP’s request for information about the participant’s benefits unless the participant provides written authorization, or is on the phone with the AP or the AP’s attorney. Most ex-spouses do not cooperate in this way (especially after the divorce is final), which leaves the AP without important information needed to draft the QDRO.

But U.S. Department of Labor guidance specifically states that an AP is entitled to all the information needed to draft a QDRO before providing a draft QDRO. Further, an AP is a “beneficiary” and ERISA provides that beneficiaries are entitled to the same information about benefits as participants. An experienced QDRO attorney will know how to obtain the information needed in the face of an obstinate plan administrator.

Reviewing Your Separation Agreement Language: after many years it may be difficult to find this document. But the bigger problem with your separation agreement language is that it is not likely to provide anything other than generic language that you are entitled to “50%” or “half” or “a marital share,” which leaves out so many important aspects of the benefit that this is a separate and much longer topic. In brief, an attorney knowledgeable about QDROs will be able to make the best arguments to maximize the available benefits if the separation agreement language is minimal. While that doesn’t mean an AP will obtain those benefits as part of the QDRO, using an experienced QDRO attorney may be the AP’s best shot at getting them if his or her separation agreement left important elements of the benefit out.

Calculating the Correct Share for 401(k), 403(b), or other Defined Contribution Retirement Plans: hopefully the separation agreement language stated that the AP is entitled to “gains and losses” or “investment earnings” on his or her marital share. This is important because any amount the AP was owed one, five, or ten years ago almost certainly would have gained value in the ensuing years, and that gain is part of the marital share. But over time, employers often change service providers, and when that occurs the investment activity from the period with the earlier service provider (“Investment Manager #1”) is difficult, and maybe impossible, to obtain. Investment Manager #1 may say the AP is not entitled to that information because the participant is the account holder. Even if you get the gains calculation from Investment Manage #1, the DRO must be drafted to direct the current service provider, Investment Manager #2, to use the correct starting figure to calculate the remaining gains on the AP’s share, up to the date the total share is segregated for the AP. If the AP’s gains cannot be calculated with Investment Manager #1, another option is to get your former spouse to agree on the amount you are entitled to as of the day the plan switched to Investment Manager #2. Obviously, an uncooperative ex-spouse may make this difficult, and the AP may end up back in court.

The Dissipation of Assets Prior to Sending the QDRO to the Plan: if no QDRO was ever processed, a participant may have started to draw his or her pension at earliest retirement age. In other words, unbeknownst to the AP, the AP’s share of the benefits may have been going into the pocket of the participant for years. It is therefore critical to put the retirement plan on notice that a QDRO is being drafted and submitted, particularly if the participant is near retirement age and can draw or otherwise access benefits. ERISA provides that, during any period in which the issue of whether a DRO is a “qualified domestic relations order” is being determined (whether by the plan administrator, a court, or otherwise) the plan must separately account, or segregate, the amounts that would be payable to the AP if the DRO was determined to be a QDRO (in other words, the DRO had been qualified). This protects the AP’s share while the plan, the parties, and the court are engaging in the process of drafting, approving, signing, and filing the DRO to submit to the plan for qualification. It is therefore very important for a QDRO attorney to advise the plan in writing that the AP is entitled to a share of the benefits and the parties are actively engaged in obtaining the DRO. It is also important that the plan be able to determine from the notice what share of the benefit will ultimately go to the AP so that it may segregate the appropriate amount. A QDRO attorney may provide this information by submitting a draft DRO or other documentation, depending on the plan’s requirements. Notification may also have the effect of freezing a participant’s account, so care must be taken with these communications. Under ERISA, this segregation, or hold period, is a maximum of 18 months, beginning with the date on which the first payment would be required to be made under the DRO. After that 18-month period of time, if no QDRO determination has been made, the plan must release any segregated amounts to the participant.


Taking the First Steps with Your QDRO

An experienced QDRO attorney can answer your specific questions and begin this very important process with you, ideally sooner rather than later. Contact McKain Law if you would like our assistance with an estimate and the steps you need to take to protect your share of the marital retirement benefits.

Carla McKain