A Qualified Domestic Relations Order (QDRO) from your retirement plan provider will be required to obtain a percentage of retirement after divorce. Furthermore, if you do obtain your portion of retirement assets without the order, which is extremely unlikely, the amount will be subject to tax penalties.

Given the significance of the QDRO, it is worthwhile to understand the most common mistakes made by people when creating the order and how to avoid them. Upon knowing the mistakes that can be made when preparing a QDRO order, ensure that an excellent divorce attorney is hired to protect your interests. 

Here are common QDRO mistakes and how to avoid them:

    1. QDRO Preparation Timing

The timing of the QDRO preparation determines whether you, as the alternate payee, will be entitled to a share of the participant’s retirement benefits. To ensure that you do not lose out on the benefits, have the QDRO prepared as soon as your divorce is finalized. Alternatively, the order should be issued as soon as both parties have agreed on asset distribution. As a result, the QDRO can be filed concurrently with the dissolution judgment or added to it.

If a new plan administrator takes over the plan division, an alternate payee may also lose retirement benefits. A plan administrator is unlikely to continue with a QDRO with a valuation dating back to when he was not present. Significant problems with the retirement division can be avoided if both parties have previously prepared plan statements dating back to the date of separation.

    2. Following A Model QDRO Plan Blindly

Most sample models obtained by law attorneys are designed to favor the participant, and blindly following them will result in a frustrating order due to issues such as incorrect distribution of losses and survivor benefits.

Most attorneys obtain a sample QDRO plan and insert the names of the parties involved, with little regard for review or revisions. Furthermore, some people who attempt to model their own QDRO plan are unable to have it done properly enough to be accepted by the court that oversaw the divorce.

    3. Incorrect Dividend Method For Retirement Plan Type

The settlement agreement should be determined by the type of retirement plan. Benefits in a defined contribution plan, such as a 401(k), 403(b), or 457 deferred compensation plan, are based on actual monetary contributions to the plan, whereas benefits in a defined benefit plan are based on a monthly annuity based on the plan participant’s years of service credit, final salary, and age at retirement. The defined contribution plans should address issues such as the total account balance of the participant and provide the option of an immediate distribution or rollover of the alternate payee’s share. The contribution plan, on the other hand, should not refer to the participant’s “accrued benefit” or provide for a “monthly” benefit.

Summarily, the division of retirement benefits and other legal separation issues can be complicated if you do not hire an experienced attorney to oversee them. If you require assistance in obtaining your rightful retirement benefits, do contact us or fill out the contact form.