Understanding QDRO basics will make your life easy as many governmental plans are not subject to QDROs, and you need to research what division is possible.
By Robert G. Hetsler, Financial specialist
1) What is the name of the plan? Have your clients shown you documentation and included the actual plan name and type of plan in the document? The financial institution where the plan is held is not the name of the plan.
2) Does the plan accept an order to divide the assets, and if so, does it accept a QDRO? This is the most frequent problem with pensions. Many governmental plans are NOT subject to QDROs, and you need to research what division is possible. If a QDRO is not accepted the divorce may need to order the participant to pay the ex-spouse directly. Is that a scenario the clients are comfortable with or is there a better division of assets that can be made?
3) Can the client take a lump sum distribution? Many times clients come to us to write a QDRO thinking they will be getting a lump sum distribution immediately, only to find out that they must wait until their ex-spouse retires, and then only get a monthly payment until such time as he dies. They are often very angry when they realize this, and would have preferred different arrangements in the negotiation. In order to represent their interests, you must know what the plan allows.
4) Define the details. Put it all in writing. Should interest accrue on the account from the time of divorce until time the account is separated? Should loans be included? Who should pay for the QDRO? Separate vs shared interest in pension funds? Survivor Benefits (again make sure you know what the plan allows)?
5) Clearly state the amount or percentage. The plan will not calculate this for you. $50,000 less 33% of his bonus for the next 6 years is not reasonable. The plan will reject the QDRO and leave your clients in a bind. If a percentage, clearly state how that percentage is to be calculated.
6) Do not include conditions. The plan will not be your monitoring service. Do not include things like if they are not remarried, or if they do not make over $XX,000 per year. Again, the plan will not accept the QDRO.
Robert G. Hetsler, J.D., CPA, CVA, CFF, FCPA is a financial specialist in the division of retirement and pension accounts in divorce cases. Dr. Hetsler is often called upon during divorce proceedings by attorneys and mediators nationwide to provide expert assistance in the division of retirement accounts. Hetsler Mediation & Valuation, Inc. is a Forensic & Investigative Accounting Firm specializing in litigation consulting, investigative accounting, and business valuations in family law and civil matters.