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How a QDRO can help divide pensions

| Jul 8, 2020 | Divorce |

One of the overlooked issues in a Virginia divorce is the division of defined benefit plans. This has a great impact on each spouse’s financial future. Many people confuse this with dividing defined contribution plans such as retirement accounts, but the two involve different considerations.

The divorcing couple will usually need something called a QDRO to divide things such as a pension. This stands for a Qualified Domestic Relations Order. In general, the law gives great protections to pension accounts, making them nearly untouchable by creditors. Ordinarily, this would also make it impossible for an ex-spouse to touch the defined benefit. However, when the court enters a QDRO, it has the necessary language that the law requires to divide this benefit.

There are strict requirements for a QDRO in order for them to be valid. They must contain certain information, including the percentage of the benefit to which the ex-spouse is entitled. They may not contain anything that enlarges the benefit or allows for survivor benefits. The document only becomes “qualified” with respect to the governing laws when it is sent to the plan administrator for their review and approval. The QDRO becomes an even greater issue in a “gray divorce” when the couple is over the age of 50. In these cases, the couple is very focused on their individual financial futures and retirements.

Those who are in the process of a divorce where a pension is at issue need to be aware of the technical requirements of the law in this area. They should consult with a property division attorney to learn more about their own legal rights and how a pension can be divided. The law is very exact in this area, and a lawyer could help facilitate a smoother divorce process for their client.