Splitting Retirement Benefits: Your Guide to QDROs for the Care Team Solutions, LLC Retirement Plan

This 401(k) plan is likely to include both employee salary deferral contributions and employer matching or profit-sharing contributions. One of the biggest QDRO mistakes we see is assuming all money in the account is divisible. That’s not always the case—especially when employer contributions are subject to a vesting schedule.

When writing the QDRO, it’s critical to:

• Specify the percentage or dollar amount to be assigned to the Alternate Payee
• Clarify whether only vested funds are being divided
• Address gains or losses from the date of division to the date of distribution

At PeacockQDROs, we always confirm the exact funds eligible for division before moving forward with drafting and administrative filings.

In many General Business 401(k) plans, employer contributions are subject to grading vesting schedules—often 3 to 6 years. If your divorce occurs before full vesting, some of the employer-contributed money in the account may be forfeitable. This must be factored into your QDRO. Failure to do so could result in the Alternate Payee receiving less than expected.

During divorce negotiations, be clear on whether your division is based on the vested amount as of the date of separation or a later date. We help our clients clarify this with the plan administrator to make sure there are no surprises when the funds are actually distributed.

Many employees take out loans from their 401(k)s. These loan balances do not count as part of the divisible account value in a QDRO unless specifically included. You must decide whether to divide the net of the loan or to account only for the actual balance.

For example, if the account contains $100,000 but there’s a $20,000 loan balance, is the marital portion $100,000 or $80,000? The QDRO must be crystal clear on this.

We regularly work with clients and attorneys to confirm with the plan administrator how loans are treated and to make sure the language reflects your intentions.

The Care Team Solutions, LLC Retirement Plan may allow for both traditional (pre-tax) and Roth (after-tax) contributions. These are two separate account types and must often be treated separately in a QDRO.

If the participant has both types of accounts, make sure your QDRO specifies whether the division applies to:

• The total account balance
• Only traditional 401(k) funds
• Only Roth 401(k) funds

Mistakes here can lead to future tax consequences or delay in processing by the plan administrator. We’ve found that clearly separating Roth and traditional assets in the QDRO avoids confusion and helps get the order processed correctly and faster.

Before drafting the QDRO, we collect the following documents to ensure accuracy:

• Most recent account statement for the participant
• Summary Plan Description (SPD)
• Contact info for the plan administrator

Each plan has different requirements. Some have model QDROs; others require very particular language. That’s why it’s crucial to work with a QDRO firm familiar with diverse plan provisions across the General Business industry and Business Entity plans like this one.

Some plan administrators will review the draft order before it’s submitted to court. If the Care Team Solutions, LLC Retirement Plan offers this, we’ll handle it so you aren’t blindsided by a rejection after filing.

Once the QDRO is approved and finalized, it needs to be submitted to your local court for a judge’s signature. After it’s signed, it’s ready to be sent to the plan administrator for implementation.

This is where many QDROs fall through the cracks. At PeacockQDROs, we take care of final submissions and proactively follow up with the administrator to ensure the Alternate Payee receives their portion of the Care Team Solutions, LLC Retirement Plan efficiently and without unnecessary delays.