Employer-provided retirement plans are very important assets, and in a divorce proceeding, their importance rises to a whole new level.
Certain retirement fund benefits may have one or more beneficiaries, but Qualified Domestic Relations Orders, or QDROs, must first go to the administrator of the retirement plan.
ERISA and the IRS
State law largely governs the proceedings in a New York divorce. However, federal law also comes into play when the matter at hand is the division of retirement interests. The laws of note are the Employee Retirement Income Security Act of 1974, better known as ERISA, and the Internal Revenue Code of 1986.
The domestic relations order
A domestic relations order is an order, a decree or a judgement concerning alimony payments, child support or marital property rights, that a state authority, usually a court, issues. In a divorce proceeding, a property settlement that the divorcing parties agree to is not enough to be considered a domestic relations order.
The plan administrator weighs in
Under the rules ERISA and the IRS Code set forth, portions of a retirement fund can be assigned to certain beneficiaries such as a child or a former spouse only if a QDRO is properly in place. ERISA rules state that if there are multiple retirement funds, separate QDROs must be submitted to the plan administrators. The payment of benefits must happen in accordance with the terms of those orders. However, it is up to the plan administrator to decide whether a domestic relations order qualifies as a QDRO, and that determination could have a significant effect on the outcome of a divorce or other domestic relations case.
Getting the facts
An attorney experienced with retirement plans and QDROs will tell you that the distribution of funds can be complicated. It is always incumbent upon the attorney to contact plan administrators for any additional information that might be pertinent in a divorce proceeding.