The Issues Surrounding Oklahoma QDROs
I prepare “qualified domestic relations orders” (also known as QDROs) for individual clients and family law attorneys. This area of the law is filled with potential missteps and pitfalls. Because I have spent years focusing on this area of the law I am able to ensure my clients receive all of the benefits to which they are entitled while guiding them through the process of drafting and implementation of a QDRO as quickly, and as smoothly, as possible. It is my goal to take the frustration and stress out of this piece of an already stressful divorce. Whether you are an individual overwhelmed by the news you must submit a QDRO to divide a retirement account, or you are a busy family law attorney who does not have the time to properly research this hyper-technical area of the law, I am here to help.
Many times in a divorce the most valuable assets are the retirement accounts. Also, at times these assets are overlooked during the division of the parties’ assets in favor of more obvious things such as a house or business. The law in Oklahoma, as in other states, dictates that retirement benefits earned during a marriage are marital property that can be divided between the parties upon divorce or legal separation. This is not an absolute, and it is subject to the specific facts of each situation, but most often a person acquires some interest in their spouse’s retirement accounts during a marriage. When the parties are working out an equitable division of the assets accumulated by both of them during the marriage it is often decided that one or both parties’ retirement accounts must be divided in order to achieve this goal. When a retirement account is to be divided pursuant to a divorce or legal separation it requires a very specialized court order typically referred to as a “qualified domestic relations order” or “QDRO.” This specialized court order is required because of the tax-deferred nature of most retirement vehicles.
The term “qualified domestic relations order” or “QDRO” is often used to refer to any court order intended to divide a person’s retirement benefits pursuant to their divorce or legal separation. Technically speaking, the term “qualified domestic relations order” is defined in the Internal Revenue Code (Code) and the Employee Retirement Income Security Act (ERISA), and applies to those certain types of retirement plans defined in the Code and ERISA, and not specifically excluded by ERISA. Most notably among those types of plans excluded from ERISA are governmental plans. This means the retirement plans of federal, state and municipal employees such as federal civilian employees, teachers and police officers do not recognize the use of a QDRO to divide the retirement plans between spouses in a divorce or legal separation. In the instance of governmental plans, laws have been passed establishing the policies and procedures by which these plans are divided and the contents of the QDRO-like orders required to accomplish this goal. To complicate matters further, these non-ERISA governed plans often create their own name for their QDRO-like order. The titles given to these non-ERISA governed retirement plan division orders are limited only by the imaginations of the drafters of their respective rules, but their purpose and effect are the same. Some examples of the titles of these governmental plan division orders are a “court order acceptable for processing,” a “retirement benefits court order,” a “qualifying court order” and a “qualifying domestic order.”
As anyone who has ever begun reading the benefits material presented by their new employer can testify to, your eyes can quickly glaze over as you read about the various investment vehicles provided to allow you to draw income in retirement. Depending on the types of employers a person works for during their lifetime they may participate in plans such as 401(k)s, 403(b)s, 457s or some form of pension. As well as the ERISA/non-ERISA distinction discussed previously, every plan has its own internal rules. Further, not all plans offer the exact same benefits. For example, some plans offer the ability to elect a lump sum distribution at retirement or elect an annuity payment for life or some fixed term. Other plans may only allow one option or the other. Some plans offer survivor benefits while others do not. Further, there are even differences between plans that offer survivor benefits as to the ability to name more than one beneficiary. This particular issue may arise if a person getting divorced is directed to award a survivor benefit to their now-former spouse but they want to be able to grant a remainder of the survivor benefit to a future spouse if they should remarry someday. There are also plans with specific rules that cause a recipient of a share of their former spouse’s retirement benefits to forfeit such benefits if they remarry before a certain age. Another very common plan causes a spouse awarded survivor benefits to forfeit that award forever if the benefit is not applied for within one year of the divorce.
Every retirement plan has a plan administrator charged with, as you would expect, administering the plan. It is the plan administrator that reviews all retirement benefit division orders (whether a QDRO or QDRO-like order) and determines its acceptability. Under ERISA, plan administrators are given the authority to develop and implement their own rules for the processing of QDROs. These internally developed rules cannot conflict with, or override, ERISA but instead fill in the gaps where ERISA is silent. In the instance of governmental, non-ERISA plans, the laws passed to create the benefit perform the function of ERISA and the plan administrator is charged with interpreting those laws and developing rules to implement them. Under ERISA and non-ERISA plans it is the plan administrator that has the final word on whether a QDRO or QDRO-like order is acceptable to the plan, and therefore, lawfully directs the plan to divide the retirement benefits. Many people, including some attorneys, believe that the court determines whether a QDRO or QDRO-like order is acceptable, but this is not the reality of the situation.
The previous summary offers a glimpse of the complex and often confusing issues involved in successfully drafting and implementing a QDRO or QDRO-like order to divide retirement benefits. Due to the wide variety of retirement plans offered by private institutions and governmental entities, and their respective laws, policies and procedures, it is advisable to employ an attorney like me to assist you. In an area of the law such as drafting qualified domestic relations orders, which is filled with potential pitfalls, you deserve the peace of mind that comes with having an experienced advisor on your side. Whether you are an individual or a family law practitioner, I will ensure the drafting and submission of your qualified domestic relations order is done properly and as quickly as possible, while considering all of the benefits due the client.