West Chester, PA 19380
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Lee Ciccarelli is the founder and managing partner of Ciccarelli Law Offices with over two decades experience as a practicing attorney.
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A qualified domestic relations order, or a QDRO, is a legal tool used to distribute the funds from a retirement plan. These accounts often include 401K and IRAs. Such accounts make up a large portion of marital estates, and a QDRO is crucial to the divorce process.
QDROs can also be used to enforce child and spousal support and marital property rights. While a QDRO is essential to dividing pensions and 401K, they come with numerous issues.
There are many issues with ODROs. Resolving these issues can be complicated. Because of this, you will need the guidance of an attorney with experience in resolving QDRO issues.
Lee Ciccarelli has over two decades of experience representing clients in the divorce process. He will guide you through the complicated process and ensure it is done properly the first time. Don’t try to resolve QDRO issues on your own. There is too much room for error and too much at risk.
To schedule a free case consultation with Ciccarelli Law Offices, call (877) 529-2422 or submit your information in the online contact form. We help clients resolve QDRO issues in southeastern Pennsylvania counties such as Chester County, Lancaster County, Delaware County, Philadelphia County and Montgomery County.
One of the most common issues with a qualified domestic relation order is misunderstanding the type of plan that should be divided. Often, the order will wrongly state “retirement plan” and not define the type of plan that needs to be divided.
Retirement plans can include defined contribution plans, defined benefit plans or a type of hybrid plan. All plans are different, and they have various implications when trying to divide them. If the order just says, “divide retirement plan” the amount may end up being divided in a way you and your spouse never intended.
Even when the plan is named, it is often incorrectly named. Most QDROs will say, “the husband’s retirement plan and the wife’s retirement plan shall be divided equally.” It’s common for both parties to have numerous plans, so if you fail to include the actual name, you may be faced with a situation where one party only intended to divide their pension and not their 401K.
To avoid this issue, review the document with an attorney. They can ensure the name of the plan is listed and properly describe how the receiving party shall receive their payments.
The Q in QDRO stands for qualified. This means that a plan is qualified under the Employee Retirement Income Security Act of 1974 (ERISA). The ERISA is a federal law that establishes a minimum standard for pension plans in private industries.
Not every retirement plan is controlled by the ERISA. Because of this, not all plans can qualify and therefore not be divided under a QDRO. The majority of state, local and federal government pension plans are not required to follow ERISA guidelines. Instead, these plans are often divided under a domestic relations order (DRO).
Other retirement plans that cannot be divided under a QDRO include supplemental, non-qualified and excess benefit plans. These plans are usually for high-level executives, and they act as a “golden parachute” type of payment. No matter what an agreement might say about such plans, they are not governed by the ERISA and cannot be divided under a QDRO.
It’s common for a separation agreement to fail to address who is responsible for drafting the QDRO. If you plan to use an attorney or a QDRO expert to draft the document, then the name of that individual should be listed on the QDRO. It is also important for a time frame to be agreed upon. This way the form can be drafted and submitted for pre-approval to the plan’s administrator.
Unfortunately, many QDROs fail to be drafted. This rarely happens in defined contribution plans since the alternate payee is aware they are entitled to the proceeds from the QDRO. However, it’s common for benefit plans to never be drafted since the participant may not plan to retire for years, so there is no sense of urgency.
QDRO FAQ- Visit the United States Department of Labor website to view an FAQ forum of QDROs. The form answers questions like what is a QDR, who can be an alternate payee and information that needs to be included.
Employee Retirement Income Security Act (ERISA)- Follow this link to learn more about the ERISA. You can find out what the plan provides and what it doesn’t cover. Information about the ERISA can be found on the U.S Department of Labor website.
A divorce is already a complicated process. Add in a QDRO, and the process can become more complicated. Ciccarelli Law Offices understands the ins and outs of QDROs. We will sit with you and ensure all issues with the order are resolved.
QDRO issues are too complex to handle on your own. Resolve them with the guidance of an attorney at Ciccarelli Law Offices. Call (877) 529-2422 to schedule a free consultation, or submit your information in the online contact form. We represent clients in areas such as West Chester, Caswallen, West Goshen, Windon, Marshallton, Altor and many more.