Qualified Domestic Relations Orders (QDROs)
What is a Qualified Domestic Relations Order?
A qualified domestic relations order (QDRO) is court order that assigns to an individual the rights to certain portions of, or all of another person’s retirement plan benefits.
Why Does Someone Need a QDRO?
During divorce proceedings, any pension plans, retirement benefits, or other types of investment-related accounts are considered to be marital property and are therefore subject to equitable distribution. Because taking money from these types of accounts generally triggers a tax event, a QDRO is issued so that the individual claiming rights to the investment account does not incur a tax penalty for withdrawing the funds.
How is a QDRO Award Calculated?
North Carolina General Statutes discuss pension and retirement benefits in § 50-20.1. The statute says that an award will be determined by using the proportion of time the marriage existed (up to the date of separation of the parties), simultaneously with the employment that earned the pension, retirement, or deferred compensation benefit, to the total amount of time of employment.
The award will also be based on the accrued benefit, as provided by the plan or fund, calculated as of the date of separation, and shall not include contributions, years of service, or compensation, which may accrue after the date of separation. A Qualified Domestic Relations Order award will include gains and losses on the prorated portion of the benefit vested at the date of separation.
How is a QDRO Issued?
An attorney should assist you in drafting a Qualified Domestic Relations Order, as it must contain specific language which may be unique to each type of account involved. At a bare minimum, a QDRO must contain language which properly identifies the name of the plan, information for the beneficiary of the plan, the amount to paid and how that amount was determined, the frequency of payments and dates for which payment is to occur. Once the document is drafted and reviewed by a judge, the judge will provide a signature on the QDRO and it can later be sent to any institution responsible for managing the funds.
This Blog/Web Site is made available by Gilles Law, PLLC , a Charlotte-based law firm, for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site, you understand that there is no attorney-client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.