Divorcing New York residents often are surprised to learn that their divorce judgments and property settlements fail to address the dispersal of pension funds from a participant’s benefits account. They discover that what they actually need to file are Qualified Domestic Relations Orders (QDROs).
QDROs are court-approved orders assigning some portion (or rarely, all) of a participant’s retirement plan benefits to the participant’s child, spouse, former spouse or other dependents. These beneficiaries are referred to as alternate payees.
QDROs are issued for only three reasons. The courts issue them as alimony, child support or as a part of the marital assets divided during divorces or separations.These agreements are subject to the amended Internal Revenue Code of 1986 (IRC) and must abide by rules established by the Employee Retirement Income Security Act of 1974 (ERISA). They must also contain the following:
- The pension plan’s name
- Names and last known addresses of the participant and alternate payee(s)
- How much is to be paid out, the duration or frequency of the payments and the manner of the disbursements.
While those are all of the IRC and ERISA requirements, the plans themselves may require additional information that is specific to those retirement plans. To learn whether additional information is needed, the attorney handling your divorce can contact the Administrator of the plan.
While not all New York divorces will require QDROs to allocate the marital assets fairly, those that do must have them or the benefits will not be disbursed. Getting it all done at the time of the divorce is generally the most cost-effective method for all concerned.
Source: Fidelity.com, “Frequently Asked Questions,” accessed March 02, 2018