What is a QDRO, DRO, or DBO? Common QDRO FAQs.

What is a QDRO?

If you are going through the divorce process, or have a judgment in hand, you probably have heard the term “QDRO” tossed around, or even see it in the divorce agreement itself – “retirement account to be divided by QDRO.” But what does this mean in English?

A Qualified Domestic Relations Order (QDRO) – also known by a variety of terms depending on your state or plan, such as DRO, QILDRO, DBO, or simply a Division Order – is a court order that divides a retirement account pursuant to federal or state law. There are numerous state and federal laws that protect retirement accounts and pensions from creditors, so in order to bypass these protections, there is an exception for properly drafted QDROs pursuant to a divorce.

QDROs are often drafted with the cooperation of both parties and their attorneys. A QDRO does not typically convey any new rights – it merely takes what you’ve already agreed to (or what was ordered by a judge) in a divorce and puts it in a separate order that complies with state and federal laws.

The Stages of a QDRO

Open a Case

QDROs are not a DIY affair - a tiny typo can cost you thousands. In fact, most divorce attorneys won't even touch them - they are too afraid of the complexities of federal and state retirement division law.
The best course of action is to hire an attorney that routinely handles QDROs.

Research the Plan

Every retirement account has different options and requirements. Every divorce has different terms. This is where the attorney reviews your divorce documents and researches the plan.
If the employee-spouse is cooperative (or is the one that hires the QDRO lawyer), this is a quick process. If not, there is a lot of digging and detective work involved.

First Draft

Using the language in the divorce decrees, default rules in state law, and the parties' agreement to fill any gaps, I prepare the first draft of the QDRO.

Plan and Parties' Approvals

After drafting the QDRO, I send it to the plan for pre-approval. This ensures that it meets with their internal requirements and minimizes the chance of headaches down the line.
Once the plan approves the draft, both parties are presented with the document for signing. If either side refuses, they are given time to voice their objections and, if needed, to prepare their own QDRO draft.

File With Court

The QDRO, once signed, goes to the judge for her signature. If either person refuses to sign, we refer the parties to family law attorneys to resolve the matter through litigation.
This is often the longest part of the processing, as courts have very particular filing procedures that vary by courthouse or even by judge, and most courts have backlogs, so they won't look at a QDRO for weeks or months.

Execution

Once everything is signed, we forward a certified copy of the QDRO and the divorce decree to the plan to carry out the division.
For pensions, this typically means both parties will receive payments when the employee-party retires.
For 401ks and other cash accounts, the account is split and the non-employee spouse can typically choose to cash out, roll over to another account, or leave it with the existing bank or retirement fund to keep growing.

Frequently Asked Questions on QDROs

Let's talk retirement division, shall we?

How long does a QDRO take?

This is absolutely the most frequently asked question, and the maddening answer is: it depends. The average QDRO, from start to execution, takes approximately sixteen months. We’ve seen some go as fast as a couple months, and some go a few years. Common speedbumps include: parties refusing to cooperate or sign, retirement plans taking a long time to pre-approve, and court backlog.

What if my ex-spouse is uncooperative?

As you can imagine, we see this a lot, though surprisingly most people do come around in the end. I personally reach out to the other party and try to talk the issue through with them. They are given multiple opportunities to voice objections to the language in the QDRO or suggest revisions.

In the end, if they fail to cooperate, we refer you to a family law attorney, who can ask the judge to process the order without the other party’s signature.

How much does this cost?

We try to be as transparent with pricing as possible: see here.

Beyond our fees, there are court fees (which range from free to a few hundred dollars, depending on the court) and plan administration fees (also in the range of free to a few hundred dollars, though this is typically taken out of the retirement account and does not need to be paid upfront).

If cost is a big concern, please bring it up with us! We’ll talk you through your options, including payment plans (with us), self-filing your documents, and more.

What do I need to get started?

At a minimum, I need a copy of the divorce decree (also known as the judgment or settlement agreement). I also need any information you have on the retirement plan: account number, statements, balances, etc., plus the contact information for all parties, their dates of birth, and social security numbers.

If you are the employee-spouse, I may ask you to sign documents to allow me to speak to the plans directly about the accounts, rather than burden you with chasing down plan information and statements.

What is a QILDRO? DBO? DRO?

A Qualified Domestic Relations Order, by any other name, is still basically a QDRO – it’s just a matter of labels. QDRO comes from the federal law ERISA – an order is said to be “Qualified” under that law and and is a QDRO or it is not and is simply a DRO. Some state retirement plans don’t fall under federal law and require DROs. Some states call it a Division of Benefits Order (DBO). Illinois calls it a QILDRO (Qualified Illinois Domestic Relations Order).

Most lawyers and judges will just refer to all division orders as QDROs, rather than try to keep each state’s term straight.

When should I have a QDRO prepared?

As soon as possible! In some states, there is not a strict time limit, whereas in other states, the limit can be as short as five years. In the meantime, here are a few thing that could happen:

Your ex-spouse could cash out, leaving you with nothing to divide.
Your ex-spouse could die, leaving you with no pension rights or with a fight to secure part of a 401k after death – a very expensive and uncertain legal process.
Your ex-spouse could remarry and retire, cutting you out of survivor benefits when they pass away.
Your ex-spouse could change existing survivor benefits (to cut you out) or retire and decline survivor benefits (which is often an irreversible election, leaving you out of luck if he or she dies).

In the grand scheme of divorce generally, a QDRO is not particularly expensive and it secures your share of retirement income. It should not be delayed.

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