Using a QDRO to Divide a Qualified Plan During Divorce Proceedings
In general, ERISA rules do not permit a participant in a qualified plan to assign the participant's interest in the retirement account to another individual. These rules are intended to ensure that a participant's retirement benefits are available to provide financial support for the participant's retirement years. A limited exception to this rule is provided for assignments of retirement benefits through qualified domestic relations orders (QDROs).
Under the QDRO exception, a domestic relations order may assign some or all of a participant's retirement benefits to a spouse, former spouse, child, or other dependent to satisfy family support or marital property obligations if there is a "qualified domestic relations order." ERISA requires that each retirement plan pay benefits in accordance with the applicable requirements of any "qualified domestic relations order" that has been submitted to the plan administrator.
Per the QDRO, a portion of the participant's assets within the qualified retirement plan can be separated and rolled over into the other party's IRA without penalty or interest. Once the distribution from the qualified plan to the new IRA has taken place, the assets in the roll-over IRA becomes the sole and separate property of the IRA owner.
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