QDRO Benefit Distributions

When a divorce court reaches funds in a qualified retirement plan, a number of steps must be followed to legally divide these marital assets.

In order to decide how to divide retirement benefits under a qualified domestic relations order (QDRO), the types of benefits provided by the qualified plan must first be identified. Most benefits can be classified as either:

• retirement benefits that are paid during the participant's life
• survivor benefits that are paid to beneficiaries after the participant's death

Currently, the legal definition of a QDRO appears to be broad enough to include an order that directs the plan to provide the alternate payee (a.k.a. your former spouse) with benefits in any form authorized by the plan, even if that payment form is not the one elected by the employee. For example, the court may award your former spouse's share in a lump sum, even if you have elected to receive an installment annuity.

The only restriction seems to be that the court cannot order payments in any form that is not already provided for in the plan. Thus, if the plan does not have an option for annual payments, the order cannot direct the plan to make an annual payment to your former spouse.

In addition, there are special rules to consider regarding early retirement benefits and survivor's benefits under a QDRO.

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