What Is a Qualified Domestic Relations Order (QDRO)?

A qualified domestic relations order is a legal document, typically found in a divorce agreement, that recognizes that a former spouse is entitled to receive a predefined portion of the other spouse's individual retirement plan assets.

Understanding the QDRO

The QDRO generally grants the spouse 50% of the value that the account accumulated during the marriage.

Once the distribution is made, the former spouse becomes responsible for any taxes due.

If there is no QDRO and the account holder distributes retirement plan assets to the former spouse, the account holder would be responsible for the taxes on the assets transferred.

Retirement benefits from more than one retirement benefit plan can be subject to a QDRO as long as it clearly states the benefits that are assigned to the former spouse.

Limitations of a QDRO

Rules imposed by the U.S. Department of Labor's Employee Benefits Security Administration restrict certain provisions being included in a QDRO. The court order cannot force a retirement plan to disburse any benefit or option that is not provided through the plan. The QDRO cannot require increased benefits from the retirement plan. Benefits cannot be required from a plan for an alternate payee when those benefits are already required to be covered by another payee who is under the decree of another QDRO. A benefits plan cannot be required to cover benefits that are a qualified joint and survivor annuity for the ex-spouse and any later spouses.

In some cases, a QDRO might be put in place for a relation other than a former spouse. Dependents might qualify to receive the ordered benefits. In such instances, the alternate payee is a minor or is determined to be legally incompetent. The order can require the benefit plan to make payment to an individual with legal responsibility for that payee. This can include a guardian as well as a trustee who serves as the agent of the individual.

The plan administrator who oversees the retirement benefits subject to the order will determine if a QDRO is a qualified domestic relations order. In these circumstances, plan administrators are then responsible for ensuring their duties are fulfilled on behalf of plan participants and beneficiaries.