While few newlyweds anticipate that they may someday separate, nearly 50% of all marriages eventually end in divorce. During divorce proceedings, couples often struggle to fairly divide their assets, especially if one partner has substantial retirement savings. However, any contributions toward a 403(b) plan or employer-sponsored pension could be subject to division during a divorce. Since disbursing retirement funds during and after a divorce may present complications for both parties, the court can issue a qualified domestic relations order (QDRO), which provides for a more efficient reappropriation of retirement assets.
Rhode Island Divorces and QDROs
A QDRO is used to divide certain retirement plans during and after divorce, with the Internal Revenue Service defining a QDRO as “a judgment, decree, or order for a retirement plan to pay child support, alimony, or marital property rights.” Ordinarily, a QDRO is used to redirect assets to:
- A spouse
- A former spouse
- A child
- The account holder’s other dependents
Legally, a QDRO grants the beneficiary, or “alternate payee,” the right to all or a portion of the retirement benefits earned by the former spouse. Once the QDRO is received and approved, the beneficiary can have the funds transferred to an account in their name.
The Importance of QDROs
If the court has awarded an interest in the former spouse’s pension, a QDRO is necessary to instruct the company to divide the retirement assets. Since a QDRO is technically a court-authorized order, it should be drafted by an attorney, submitted to the court, and then forwarded to the employer for implementation.
Information Contained in a QDRO
- The full name and last known mailing address of the alternate payee
- The name and type of retirement plan being divided
- The characteristics of the account
- How the plan will be divided
- How the QDRO will be implemented, including when it will take effect and how many payments the alternate payee will receive
- Contingencies in the event that either party dies before receiving their portion of the plan
- Contingencies in the event that the retirement plan is terminated
- The amount to be awarded
Considerations When Drafting a QDRO
Since the QDRO provides instructions as to how the employer should divide the retirement assets, it must be detailed and unambiguous. In most circumstances, the company will provide a sample QDRO that can be used to expedite the process. However, boilerplate QDRO are not always ideal. In many cases, their terms favor the employee and may not include critical provisions that an attorney could insert.
Limitations of a QDRO
- The QDRO cannot require the retirement plan to provide the alternate payee with any benefits, or any options, that are not otherwise provided by the plan.
- The order cannot require the plan to offer increased benefits.
- The QDRO cannot require the plan to pay benefits to the beneficiary in the form of a qualified joint and survivor annuity for the lives of the alternate payee and any subsequent spouses.
Contact a Rhode Island Attorney Today
QDROs can have massive implications. While a well-drafted QDRO could facilitate the efficient transfer of retirement resources to a former spouse or another beneficiary, any mistake—however minor—could result in significant penalties, since the terms of a QDRO must comply with both state law and Internal Revenue Service rules for retirement accounts.
Do You Need to Speak to a Rhode Island Divorce Attorney?
If you are considering a divorce, you need to speak with an experienced Rhode Island divorce attorney as soon as possible. Please contact us online or call our Warwick office directly at 401.946.3200 to schedule your free consultation. We help divorce clients in Providence, Warwick, and all areas of Rhode Island.