A QDRO functions as a judgment or order against a retirement plan that directs a certain percentage of the plan’s benefits to one or more alternate payees. These payees may be spouses, current or former, or dependents, including children. QDROs may be ordered as a means of addressing alimony, child support, or marital property rights. They are usually used to divide a retirement benefit such as a pension or 401(k) as part of the equitable division of the divorce estate. They provide the non-participating spouse with a share of the participating spouse's retirement asset without a tax consequence. Of course, if the spouse then opts to withdraw funds after receiving them from the QDRO, then they would pay any relevant tax at that time.
The information contained within a QDRO is relatively simple. The order lists the name and last known address of each alternate payee and what percentage of benefits they are set to receive through the arrangement. Individuals cannot receive a benefit type or value unavailable under the existing retirement plan and should report any benefits they do receive as if they were named as a participant in the retirement plant. Furthermore, any taxed benefits going to children must be paid by the plan participant.
If you are getting divorced and have retirement assets as part of your marital estate, you should consult with an experienced attorney like Carla Risoldi. She can be reached at 215-741-3700, www.risoldilawoffices.com
