Dividing retirement assets during a divorce is one of the most important—and most misunderstood—aspects of the property settlement process. If you or your spouse participates in the B & L Transport Inc.. 401(k) Plan, you’ll likely need a Qualified Domestic Relations Order (QDRO) to properly and legally divide those retirement benefits.
At PeacockQDROs, we’ve seen many spouses miss out on retirement benefits simply because a proper QDRO was never filed or was done incorrectly. If you’re divorcing and need to split this plan, here’s what you need to know.
A Qualified Domestic Relations Order (QDRO) is a court order used to divide retirement plan assets between a plan participant (typically the employee) and an alternate payee (usually the former spouse). Without a valid QDRO in place, the plan administrator of the B & L Transport Inc.. 401(k) Plan will not disburse any of the participant’s retirement assets to the alternate payee.
Here’s what we know about this specific retirement plan:
Although there are some missing details, they can usually be obtained through the employee spouse’s HR department or plan administrator. These identifiers are required on the QDRO paperwork, so be sure to track them down early in the process.
Since this is a 401(k) plan under a corporate sponsor in the general business sector, it usually follows industry-standard rules. However, these plans can contain special features that must be addressed in the QDRO:
Most 401(k) plans, including the B & L Transport Inc.. 401(k) Plan, include both employee and employer contributions. The QDRO can divide just the marital portion—often defined as contributions (and their earnings) made during the marriage.
This is a big one. Employer contributions are often subject to a vesting schedule. If the employee spouse isn’t fully vested, a portion of the employer match might not yet belong to them—and thus not divisible by QDRO.
QDROs can be carefully worded to divide only vested amounts or may include future vesting. Be sure that the QDRO accounts for vesting language, or the alternate payee could lose out on a share they expected.
If the participant has borrowed money from their 401(k), it reduces the account balance. Whether the loan is “assigned” to the participant or split proportionally must be spelled out in the QDRO. Remember, the plan won’t send funds for the unpaid loan amount in a distribution.
The B & L Transport Inc.. 401(k) Plan may include both traditional pre-tax contributions and Roth after-tax contributions. A good QDRO specifies how much of each type is going to the alternate payee. This affects not only tax consequences but also how the funds are rolled over or withdrawn in the future.
We’ve seen countless QDROs rejected or delayed because of key missteps. Learn from the most common errors on our page here:reach out for personalized help if you’re in one of our service states.
Willie has handled hundreds of QDROs, been named as a stipulated or court-appointed expert in hundreds of orders, testified as an expert witness on QDROs and state government pension survivor benefits, and taught CLEs on QDROs, legal ethics, and military pensions. He is a three-time ABA award-winning legal author and secured a victory before the North Dakota Supreme Court. Full bio →
