A Qualified Domestic Relations Order (QDRO) is a legal document that directs a retirement plan to divide assets between a participant and an alternate payee (usually the former spouse), based on divorce or legal separation.
401(k) plans like the Levi Ray & Shoup 401(k) Matching Contribution Plan are covered by ERISA, which means a QDRO must meet specific legal requirements in order to be accepted and processed by the plan administrator.
Is This a Defined Contribution Plan?
Yes. The Levi Ray & Shoup 401(k) Matching Contribution Plan is a defined contribution plan, meaning the value subject to division is based on the account balance at a specific point in time. This can include both employee deferrals and employer matching contributions.
Division Methods
The two most common ways to divide a 401(k) in a QDRO are:
- Percentage of account as of a specific date — for example, 50% of the account balance as of the date of divorce.
- Fixed dollar amount — such as $100,000 total to the alternate payee.
Both methods require carefully written terms to account for investment gains or losses between the division date and the distribution date.