QDRO Solutions For Attorneys: Dividing Retirement Assets for Divorcing Clients
If you are like most family lawyers, it is unlikely that you are experienced in pension valuations and the preparation of Qualified Domestic Relations Orders, known as “QDROs.” A QDRO creates or recognizes the existence of an alternate payee’s right to receive any portion of a retirement asset. Because retirement benefits are oftentimes the largest asset in a marriage, it is important to understand how to successfully handle retirement benefit division in divorce agreements. Pension valuation and the preparation of QDROs is necessary to successfully handle retirement benefit division.
At Erin K. Colgan Law we have deep experience in pension valuation and all aspects surrounding the division of retirement assets in divorce. We offer law firms and attorneys cost-effective and time efficient solutions for calculating pension valuations, preparing QDROs, and adopting the appropriate language in the divorce agreements they prepare as well as related guidance and solutions.
Pension Valuation and QDRO Preparation Services
Our team is well-versed in defined contribution plan valuations based on either the subtraction or tracing method. We also are skilled in valuing defined benefit plans for our clients. We prepare and deliver valuation of public and private pension and related assets and draft QDROs that are conforming and accurate. We offer cost and time efficient solutions both directly to our own divorcing clients and to law firms and practitioners with divorcing clients that need to evaluate and/or divide retirement assets.
We work with our attorney clients behind the scenes to help them to preserve their client’s marital assets, protect an alternate payee, and avoid malpractice. We assist in pre-trial discovery concerns, such as the nature and breadth of their client’s or their spouse’s retirement benefits, plan details, survivorship options and loans, and related areas of concern. We help to identify tax issues, use a QDRO to collect support arrears, choose the best option regarding survivor benefits, and offset other assets.
QDRO Preparation
At Erin K. Colgan Law, we draft QDROs that are conforming and accurate. Use them as part of the divorce service you provide as you move the divorce process forward with a minimum of delay. We understand the QDRO process and provide step-by-step guidance to help you to submit the QDRO and ensure the review with a plan administrator runs smoothly. Our firm is familiar with most local NYC and NY State plans as well as military and federal government benefits. We are dedicated to helping attorneys draft sound agreements to protect their client and their assets. We also work as a neutral to best advise the attorneys to reach their mutual outcome of a well drafted agreement that illustrates their settlement so that the QDRO process is smooth and without surprises. To learn more about why lawyers should hire an independent QDRO expert, click here.
We help our attorney clients to adopt the language that best fits the terms of their agreement, ensuring that the QDRO approval process with the plan administrator runs smoothly. As a neutral, we can work to have your QDRO reflect the negotiated terms already agreed. Hired separately, we can propose language to best suit your client’s specific needs.
Every QDRO is Unique
We are knowledgeable and skilled in a broad range of pension and retirement benefit plan types, including:
- Military Pensions: Military laws influence the way that a QDRO can be applied, and while the division of assets is like a QDRO, the division of military benefits is in a category of its own. Our team is well-versed in navigating the restrictions placed on access to information about military pensions, the 10/10 active-duty rule, and reallocation rules for accrued benefits to former spouses.
- Federal Pensions: Federal benefits are excluded from QDRO agreements since they are not private sector pensions and do not fall under ERISA, essentially making up another category all its own. Oftentimes, a federal pension can reflect a large portion of marital assets, making their division necessary. However, federal benefits can include a pension, lifelong annuity payouts and in some cases, health insurance – all benefits a divorcing spouse would want to keep. Most federal employment questions are based on the “spouse equity” principle. The government requires a subpoena to release information and does not offer guidance with respect to creating a court order to request division of benefits. The Colgan Law team offers a wealth of experience in the division of federal retirement benefits and offers matrimonial lawyers with a complete back-end solution to draft and complete all related court orders.
- State Local Pension: One of the more complicated types of orders is one aimed at dividing a state or local pension benefit. The New York State Court of Appeals held that a state retirement pension can be considered marital property and therefore the state will honor a QDRO that is properly prepared and then issued to it by a New York State Court. However, it is important to note that while the government will accept the QDRO to divide a state pension or benefit, as a government plan, the same benefit is not protected by the Employee Retirement Income Security Act which only applies to private pensions. Therefore, the only person that holds natural rights of membership to any plan within the State Retirement System is the member themselves. The spouse of the pension holder does not have any protections or rights unless outlined in the submitted and approved QDRO. If the rights are not explicitly outlined in the QDRO following the divorce they will have no rights or protections regarding that government pension plan. Therefore, it is vital that a knowledgeable firm draws up the QDRO and includes protective language so that the ex-spouse is protected throughout the division of the pension.
- ERISA Plan: The Employee Retirement Income Security Act of 1974 is designed to protect an ex-spouse’s interest in his or her spouse’s pension and/or retirement plan. It applies to all private pension plans, covering a wide berth of employer-sponsored pension and retirement plans. The law creates a pathway for an ex-spouse to claim the right to the asset following divorce, via the QDRO.
- 401 (k) Plan: There are several different categories of plans, each with its own set of options and rules concerning gains, losses, beneficiaries, pre and post survivorship, etc. For a QDRO to be approved and allow an ex-spouse access to a 401(k), it must be consistent with the rules of the specific retirement plan (which vary by plan and employer), satisfy both state and federal law, and be viewed as favorable by retirement plan managers who can be picky, and detail orientated.
The Pitfalls of Do-it-yourself QDROs
A QDRO is a very specific order that must be filed in a timely manner to be effective. The language used within the QDRO has both the ability to support and ruin the ability of a spouse to collect on their ex-spouse’s 401(k). Therefore, preparation by a QDRO provider is strongly encouraged. Pitfalls for lawyers that take a DIY approach to drafting QDROs include poorly written language, incomplete language, not providing all options to clients, being unfamiliar with the retirement plan, using a standard form, and lapse in time between the divorce agreement and submission of QDRO.
For help with a client’s pension valuation or to order a QDRO, phone us at (718) 981-5505.
