Court orders and judgments define how spouses’ property and post-marital support are handled. New Jersey domestic relations orders formalize alimony and child support payments and spousal property agreements. State laws govern the issuance of domestic relations orders.
The Employee Retirement Income Security Act applies to qualified domestic relation orders or QDROs. Qualified domestic relation orders allow a spouse or other dependent, known as alternate payees, to obtain benefits from a participant’s ERISA-related pension plan. A QDRO, as a separate order or as part of a divorce settlement, may apply to a portion of or all benefits in one or more retirement plans.
QDROs must meet certain standards to qualify under ERISA and, among other restrictions, cannot supersede a previous qualified domestic relations order. A QDRO must include a percentage or amount of benefits alternate payees are eligible to receive. A timeline or payment period must be stated.
QDROs cover private sector pensions covered by ERISA to satisfy property, alimony or child support agreements. Federal law dictates retirement plan administrators determine whether qualified domestic relation orders meet legal and plan requirements.
An attorney can advise whether a QDRO is applicable in your divorce. Different orders may be required for the division of plans for government employees and military service members.
Specific questions can be posed to an attorney about the division of a pension to meet the terms of a property settlement or support in a separation or divorce. A lawyer or divorce financial adviser can explain how retirement plan splits affect the value of marital property, including any tax implications. In some cases, spouses may trade off other valuable assets to keep a retirement plan intact.
Pension plans often represent the biggest asset many people have. It’s wise to take your time to understand what a QDRO is and the impact it can have before agreeing to give up any part of retirement savings.
Source: U.S. Department of Labor, “Frequently Asked Questions Qualified Domestic Relations Orders” accessed Feb. 27, 2015