One of the last tasks in finalizing a divorce is the drafting and implementation of a Qualified Domestic Relations Order (QDRO). A QDRO is the legal document that instructs a retirement plan administrator how to divide a spouse’s retirement account according to the terms in the divorce or separation decree.
In his recent appearance on Phoenix Money Radio’s “Business for Breakfast,” Cordell & Cordell Principal Partner Joseph Cordell discussed why QDROs are so complicated and why it’s important to make sure they’re handled correctly.
“All divorce lawyers think they’re good at Qualified Domestic Relations Orders,” Mr. Cordell said, “but there’s a lot of very sophisticated rules involved. … There’s just a lot of complexity now, and often divorce lawyers do not take the time to familiarize themselves with these very arcane rules.”
Typically, the plan administrator, who is the person that works at the company of the spouse who has the benefits, is tasked with dividing the benefits plan. Divorce lawyers are notorious, Mr. Cordell said, for simply handing these forms over to the administrator, which can be a crucial mistake.
“If you leave it to the plan administrator, they will often sort of unthinkingly apply their office rule,” Mr. Cordell said. “Typically, those rules will work to the benefit or the disadvantage of one side or the other.”
Mr. Cordell estimated that more than half of divorce lawyers accept whatever is given to them as a division of the plan. After a period of time, the QDRO can no longer be adjusted if there was an error, and that can add up to tens or hundreds of thousands of dollars.
“It’s up to the lawyers to sit down with this densely-worded technical document and assure that those details, for which they’re being paid incidentally, are done correctly,” Mr. Cordell said.
Listen to the entire interview below.