When should I get my QDRO prepared?
When should I get my QDRO prepared?
“Do I need to get my QDRO done immediately after my divorce?” This is a question we hear all the time. Sometimes we hear “Can I wait?”
After a divorce, you’re probably not excited about putting in the time, money, and effort it takes to prepare a QDRO, a Qualified Domestic Relations Order, and to worry about dividing the retirement benefits you were awarded in the Judgment of Absolute Divorce and/or your Marital Settlement Agreement. You may not even be sure how to go about starting the process.
Put simply, waiting can have a negative impact on your ability to receive the benefits you were awarded in the divorce. Here are
- Court Deadlines. In Maryland, after a Judgment of Absolute Divorce is entered by the Court, there is a relatively small window during which the Court can revise the Judgment. The Judgment of Absolute Divorce should be reviewed carefully to be sure that it contains clear language about the division of retirement benefits so that a QDRO can be prepared.
- Retirement of the Participant. If the Participant (your former spouse) retired, this may affect your ability to claim benefits under the terms of the Plan.
- Death of Participant. In the Participant dies without a QDRO in place, you may lose survivor benefits. You may even lose your right to any and all benefits under the Plan.
- Participant Raids the Plan. You may have negotiated to receive a set dollar amount. However, if you wait a few months or years to prepare your QDRO, your former spouse may withdraw large amounts from the account and the benefits you are entitled to may not be there for you.
- Plan Reduces in Value. You may have negotiated to receive 50% of the account balance. Looking at a statement from the Plan, that seemed fair. After lengthy delays, however, the account may be worth much less.
- Investment Experience. Often, awards are written with the phrase “plus or minus investment experience” or “plus or minus gains and losses.” This refers to how the award will increase or decrease in value based on its participation in the market. If the market goes up, the amount of the award goes up. If the market goes down, the amount of the award goes down. When it comes time to have your QDRO prepared and the market is down, you’ll lose out.
- Changes in the Plan. Retirement plans change all the time. The Plan can be sold to another company, the name can change, and the address of the plan change. This can make it extremely challenging to prepare a QDRO without costly phone calls and letters.
- Changes in the type of Plan. Some plans will “reduce risk” by converting from one type of plan to another. Accordingly, the language in the Judgment of Absolute Divorce or your Marital Settlement Agreement may no longer make sense. For example, you may have waived your share of your former spouse’s annuity and instead claimed a share of your former spouse survivor benefits. If the new plan does not offer survivor benefits, it will not be clear to the QDRO preparer what benefits you are entitled to.
When you know you’ll need a QDRO prepared, even before your divorce, reach out to a firm which prepares QDROs immediately and start the process. If you or your attorney need a QDRO prepared, please call Weinberg & Schwartz.
