Divorce and Retirement Accounts - Qualified Domestic Relations Order (QDRO)

Updated 2 months ago by Richard Phillips, EA, AIFA, CPC, CPFA, QPA, QKA

What happens to my retirement account if I get divorced?

Many divorce settlements, but not all, include the court awarding a portion of your retirement account to your former spouse, which is referred to as the Alternate Payee. This is called a Domestic Relations Order (DRO). A DRO would be prepared by one of the attorney's representing either the plaintiff or defendant and submitted to the judge for approval. After the judge approves the DRO, it's submitted to the retirement plan's Plan Administrator. This is usually a corporate officer at your company that approves retirement plan decisions.

They review the DRO for specific items that your retirement plan requires to make the DRO become a Qualified Domestic Relations Order (QDRO).

Once the DRO is accepted as a QDRO, it is submitted to your plan's service provider for processing. The provider would set up an account for the Alternate Payee and move money from your retirement plan account to the Alternate Payee's account. The Alternate Payee could then withdrawal the money from the plan.

What is a QDRO?

A QDRO, or Qualified Domestic Relations Order, is a court order to divide a participant's retirement account during a divorce and award a portion to the Alternate Payee. The QDRO grants the Alternate Payee the right to part of the retirement benefits their former spouse had accumulated in their company's retirement plan. A QDRO must include (1) each party’s name and last know mailing address, and (2) the amount or percent of the participant’s benefits to be paid to the alternate payee.

There are two steps to a QDRO:

  1. A Domestic Relations Order (DRO) must be ordered by a court, typically issued during the finalization of the divorce.
  2. The DRO is reviewed by the retirement plan administrator to ensure the order complies to the rules of the retirement plan. If the order does comply, the DRO becomes a QDRO.


What are my distribution options?

If you are the participant of the plan, you do not need to take any action. ERISA will review your account and divide the assets to both parties as the QDRO instructs.

If you are the Alternate Payee, you will be provided with an online account where you may choose how the assets are distributed. Your distribution options are:

  • Lump Sum Payment – a direct cash payment made directly to you.
  • Rollover – a transfer of your retirement account to a new 401(k) plan or IRA.
  • Split payment – a portion of your balance paid as lump sum payment and the remaining amount rolled into a new 401(k) or IRA.


How does an Alternate Payee request a distribution?

To request a distribution, complete and return the distribution form. The Alternate Payee can request a distribution form by following these instructions.

When can I expect payment to arrive?

Once a distribution form has been received, the plan administrator must review and approve the distribution. This usually takes 1 - 2 business days.

Once approved, your distribution payment will be issued by Charles Schwab Trust Bank.

Checks mailed by USPS can take up to 10 days.

Checks mailed via Next Business Day UPS arrives the next business day.

ACH Direct Deposit is usually receive the next business day.

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