Affordable QDROs, Inc.

QDRO Question of the Week: Q: Just what the heck is a SIMPLE IRA anyway? A: SIMPLE IRA is an acronym for "Savings Incentive Match Plan for Employees" and is considered an ERISA pension plan, as it is employer-sponsored, even though the contributions are immediately allocated to an employee's IRA (i.e.individual retirement account).... The Federal Court has determined SIMPLE IRAs are considered ERISA pension plans as they are 100% employer-sponsored and funded, so it is entirely appropriate to use a "QDRO" to divide them. We have prepared many QDROs for SIMPLE IRA plans, and can prepare yours as well. Call us for a free consultation.

QDRO Question of the Week: Q: I am an employee of the Federal government. Do I need to do a QDRO for my retirement plan when I get divorced? A: No, as a Federal employee, you would not do a "QDRO" to divide your retirement plan(s), but would do something called a "COAP" (Court Order Acceptable for Processing) to divide your pension plan, and a Qualifying Retirement Benefits Court Order to divide your TSP or "Thrift Savings Plan" account. ... Since Federal retirement plans are not subject to ERISA, they are not considered "qualified" retirement accounts under Federal regulations. Both the Civil Service Retirement System ("CSRS") and the Federal Employees' Retirement System ("FERS") have very specific language requirements and guidelines which must be followed when dividing Federal pension plans. Likewise, the Thrift Savings Plan (the US Government's version of a 401(k) plan) also has specific rules and language requirements which must be included in division orders for that retirement plan. We have done a multitude of division orders for all of these Federal retirement plans, and would be happy to assist you with yours. Call us today!

QDRO Question of the Week: Q: We are going through a "Do-It-Yourself" divorce, and don't want to spend a lot of money on legal paperwork. My 401(k) Plan sent me a model form for a QDRO to fill out and send to the Court. Why can't I just do that? A: Well, you certainly can do that, but since those model QDRO orders are typically very generic in nature, and may not represent the specifics of the award of the retirement plan in your particular case, you might be selling your...self short, as the model QDRO most likely does not have your best interests in mind. Many large employers try to insist their employees use these model QDRO orders in an effort to minimize their workload and claim it expedites the approval process. In reality, these models usually benefit the employer, rather than either of the parties. Please keep in mind a Plan/Plan Administrator cannot require you to use their fill-in-the-blank model, and ERISA does not give Plans or Plan Administrators the authority to either dictate the terms of a QDRO, or allow them to mandate you to use their fill-in QDRO form. We can help you avoid the pitfalls associated with using a "one-size-fits-all" QDRO for a reasonable all-inclusive, flat fee. And remember, advice is always free!

QDRO Question of the Week: Q. My soon to be ex was a member of the military and has told me that I am not entitled to any of the military pension benefits if we get divorced. Is that correct? A: That was correct until February 1, 1983 when Federal law was changed to allow for a former spouse to receive a portion of the military member's retired pay under the Court's Order. A divorce meets that requirement.... You must have been married to the military service member for 10 years or more during the time the military service member performed 10+ years of creditable military service. This is sometimes referred to as the "10/10" rule. The 10/10 rule does not apply to awards of spousal or child support, so you can be awarded a portion of the military retirement for those reasons, even if you weren't married to the service member for 10 years. We have prepared many military orders for Army, Navy, Air Force, Marines as well as Reservist retirement plans, and we are very familiar with the requirements to prepare these Orders. Please call us for a free consultation.

QDRO Question of the Week: Q: My ex has stopped paying Court ordered child support, and someone told me that I can have a QDRO done against my ex's 401(k) or profit sharing plan to collect that past due child support money. Is that true? A: Yes, that's true. The Retirement Equity Act of 1984 which allowed for the use of QDROs as an exception to the anti-alienation provisions of ERISA (see last week's question) recognized the need for the ability to recover monies owed for... past due child support, as well as for property settlement and distributions due to divorce. In fact, a QDRO can also be used to collect past due spousal support payments as well. Even if your ex is not eligible to receive a distribution under the retirement plan, most Plan Administrators will allow for an immediate distribution of the awarded funds for either past due child or spousal support under a QDRO once it is approved. So, if you are owed back child or spousal support, you can "QDRO" your former spouse's 401(k) or profit sharing plan to collect those past due amounts as a lump sum distribution. We have prepared QDROs for both past due child and spousal support and would be happy to provide you with the information you need regarding the QDRO process if you find yourself in this situation.

QDRO Question of the Week: Q: What is this "ERISA" that you keep referring to? A: The Employee Retirement Income Security Act (or "ERISA") is a Federal law which was signed by President Gerald Ford on September 2,1974. ERISA established rules and guidelines for employer-sponsored retirement plans to follow to protect workers in the private sector from unscrupulous retirement plan practices, and to insure earned retirement plan benefits would be available in the future to ...provide financial support during the participant’s retirement years. ERISA rules in general do not permit a retirement plan participant to assign or transfer their interest in the retirement plan to another person. These "anti-assignment and alienation" regulations were put in place to protect a participant's retirement plan assets, so the benefits will be available to the participant when they retire. This caused a problem for people who got divorced, since retirement plan assets are considered property, and are subject to division during a divorce. To correct this problem, ERISA was amended to allow a limited exception to the anti-assignment and alienation rules and that's when a Qualified Domestic Relations Order ("QDRO") came into existence. The QDRO is the vehicle under ERISA which allows the owner of a retirement plan to divide or assign some or all of the retirement account to a former spouse, child, or other dependent to satisfy family support or other marital property obligations. A "QDRO" can only be used for "qualified" retirement plans, and according to ERISA, that means any retirement plan sponsored by a private sector employer or corporation. ERISA does not apply to Federal or State government, County, City or military retirement plans. Those types of retirement plans have their own rules, and are divided using different (but similar) Court issued documents. The United States Congress, the Treasury Department and the US Department of Labor are responsible for the enforcement or amendments to ERISA or any of its provisions.

QDRO Question of the Week: Q: I was told that I don't need to do the QDRO until either I am ready to retire or my ex is ready to retire, and that won't be for another 10-20 years. Why do I need to do my QDRO now? A: Unfortunately you were given incorrect information. If you wait until you are ready to retire before you do your QDRO, you run the risk of getting nothing from the retirement plan. If your ex were to die unexpectedly, or change jobs, without a QDRO in place, ...you would not be able to get your awarded portion of the retirement plan, even if your divorce paperwork states you are entitled to a portion of the funds. Even if your ex is still working for the same company years after your divorce, each passing year makes it more difficult to properly prepare your QDRO. Many companies who sponsor retirement plans change record keepers and Plan Administrators on a regular basis, and old records for retirement accounts can easily be misplaced or destroyed. There is no law which requires a Plan Administrator to provide copies of their retirement plan records to a new Plan Administrator for the retirement plan. We can begin work on your QDRO as soon as you know how the retirement assets are to be split, and you have at least drafted your marital or property settlement agreement. Save yourself headache and heartache later and call us today so we can help!

QDRO Question of the Week: Q: Since I have an IRA, I have been told that I don't need a "QDRO" to divide it with my ex as part of my divorce. Is that true? A: You would not need a "QDRO" to divide the IRA, as that type of account is not considered a "qualified" plan, and therefore is not subject to that requirement under ERISA, which is the Federal Law governing employer-sponsored retirement plans.... You might, however, require a "DRO" (Domestic Relations Order) to divide that IRA as part of your divorce, if the Trustee or Plan Administrator of your Plan requires one (and some do). Many CPAs and Financial Planners suggest preparing and filing a DRO for an IRA account if they are worried about potential tax exposure using a rollover instead of a DRO as an official Court instrument to do the transfer. Since tax rules and regulations allow for several different types of documents to be used to divide IRA accounts (and a DRO is one of those) if you are transferring a large sum of money to your ex, using a DRO which has been signed by the Court may prevent any misunderstandings about the split of the asset contained in your Judgment or property settlement agreement, and correct any ambiguities as to how the asset is divided as part of your divorce. We have done hundreds of DROs for IRA accounts and have prepared detailed instruction letters to Plan Trustees to make sure there are no mistakes in the division of the assets. We can do that for you too!

QDRO Question of the Week: Q: Do I have to hire an attorney to prepare my QDRO paperwork? A: You are not required to hire an attorney to prepare your QDRO for you, and we actually prepare QDROs on behalf of many attorney clients in addition to people who are doing their own divorce. Preparing a QDRO is very specialized work, and oftentimes it is wiser to enlist the services of a retirement plan expert who only prepares QDROs to do your documents for you. We are very familiar with all of the intricate requirements and details involved with the division of military, federal government, state government as well as private sector retirement plans. We have prepared thousands of QDROs for divorcing couples, and we would be happy to prepare yours!