Home » Somerville » The Somerville QDRO Lawyers

The Somerville QDRO Lawyers

If you and your spouse are going through a divorce, dividing your marital property can be a complex process, particularly if you have both accumulated a significant amount of money in retirement or pension plans. With the exception of the marital home, retirement benefits often represent one of the most significant and valuable assets that are subject to the equitable distribution of property.

However, there are specific processes involved when it comes to dividing certain retirement benefits. For example, if the retirement plan is provided by a private employer, the Employee Retirement Income Security Act of 1974 (ERISA) requires a Qualified Domestic Relations Order (QDRO), which is a judicial order that distributes certain types of retirement or pension benefits during the divorce process. A highly skilled QDRO lawyer will discuss any questions or concerns you may have about QDROs, determine whether you are entitled to a portion of your spouse’s retirement earnings, and negotiate the best possible settlement outcome.

What Is a QDRO?

A QDRO is a court order that specifies how money in retirement accounts will be distributed in a divorce. In some cases, a QDRO will specify amounts that should be paid to a former spouse for child support and alimony or marital property rights. Once the money authorized by a QDRO is received, it should be transferred directly to an individual retirement account (IRA), or another tax-advantaged retirement plan so that the entire amount is not considered taxable income. The terms of the QDRO must be in compliance with the federal regulations in the ERISA, as well as relevant state domestic relations laws.

In order for a QDRO to be effective in New Jersey, it must include the following components:

Name of the plan participant
Name of the alternate payee, or the participant’s spouse
Address of plan participant
Address of alternate payee
Name of the plan to which the order applies
Dollar amount or percentage of benefit to be paid to the alternate payee
Formula for determining the percentage to be paid
Number of payments to be made
Time period during which payment will be made

How Do I Know if I Need a QDRO?

Some retirement accounts do not require a QDRO when dividing assets. For example, IRAs are not employee-sponsored, so a QDRO is not necessary to divide them in the divorce process. The financial institution can usually divide the account through a rollover. A QDRO is also not required if you have a deferred annuity or a government retirement plan like a military pensions plan or a federal, state, county, or city retirement plan.

However, if you have any of the following types of plans, you may need a QDRO:

401(k)
403(b)
457 plan
Tax-sheltered annuities
Corporate defined benefit or pension plans
Employee stock ownership plan
Profit-sharing plan
Money purchase plans
Thrift plan

What Is Involved in the QDRO Process?

To ensure that you receive the retirement benefits that you are entitled to in the divorce settlement, a dedicated QDRO lawyer will help you navigate every step of the QDRO process. In New Jersey, obtaining a QDRO generally involves the following steps:

Negotiate the terms of the QDRO. A range of complex legal and financial issues are involved with dividing funds in a retirement account. Your QDRO lawyer will address these issues and negotiate the terms of the QDRO with your spouse’s lawyer.
Draft the proposed order. Once you and your spouse agree to the terms of the QDRO, your lawyer will draft a proposed order that will include all of the legally required details and ask the opposing counsel to review the draft for accuracy and completeness.
Seek judicial approval. The QDRO must be legally valid if a judge signs off on it. In most cases, the judge will sign off as part of the divorce decree. However, if there are issues with the proposed QDRO, the judge may require you and your spouse to negotiate the terms.
Submit the QDRO. When you have reached a divorce agreement, you must notify the QDRO’s retirement plan administrator. If there are multiple retirement accounts that the QDRO applies to, you will likely need to notify every interested administrator.

When Should I Have a QDRO Prepared?

It is highly recommended that you prepare your QDRO as soon as possible. In New Jersey, there is no deadline for preparing a QDRO, although delaying the process could have the following negative consequences:

Your former spouse could cash out and leave you with nothing to divide.
Your former spouse could die, leaving you with no pension rights. You could also face a potentially expensive legal process if you have to fight to secure part of your former spouse’s 401(k) after their death.
Your former spouse could remarry or retire and remove your name as a beneficiary of survivor benefits.
Your former spouse could change the existing survivor benefits or decline survivor benefits when they retire. This can be an irreversible election.

Ultimately, a QDRO is an effective tool that ensures you will receive your rightful share of the valuable retirement assets accumulated over your marriage.

The following are examples of some of the main benefits of a QDRO:

Facilitates the fair distribution of certain retirement accounts and pensions, ensuring that you and your former spouse each get your rights share.
Avoids tax penalties. If you do not have a QDRO in place, you could incur tax penalties for withdrawing funds from a retirement account.
Preserves financial security. Securing a portion of the retirement assets allows you to maintain financial stability after your divorce and as you approach retirement.
Allows you to customize the distribution amount and the timing of the distribution according to the specific needs of you and your former spouse.
Ensures that the division of assets is in compliance with ERISA guidelines and that the interests of both parties are protected.
Preserves survivor benefits for the non-employee spouse after the plan holder dies.
Provides a legally binding document that outlines the specifics of assets division and prevents future disputes or misunderstandings.

How Long Does the QDRO Process Take in New Jersey?

If all parties are cooperative and no significant obstacles arise, completing the QDRO process can take two to six months. However, if there are complications or the divorce is final, and you and your former spouse are not on good terms, the process can take anywhere from six months to two years. Your dedicated QDRO can help guide you through any complications, recommend effective strategies to resolve the issues and protect your legal and financial rights.

Do I Need to Hire a QDRO Lawyer to Help Prepare a QDRO?

While you are not legally required to hire a QDRO lawyer to file a QDRO, it is highly recommended that you do so. Most divorce lawyers prefer not to handle QDROs since they do not always have the knowledge about the necessary retirement plans to handle them properly. However, the Somerville QDRO lawyers at Lyons & Associates, P.C. have extensive experience with QDROs and dividing retirement benefits.