Problems with Splitting Retirement Accounts After Divorce?

We have gotten questions about retirement fund issues after divorce from some of our blog readers.

Retirement fund issues can be difficult.   The final divorce decree will state how the property and debts are to be divided.   However, when it comes to retirement accounts, additional paperwork must be done in order to actually divide the accounts.   This paperwork is in the form of another “order” that must be signed by the judge.   This is commonly called a “Qualified Domestic Relations Order” (or QDRO).

Ideally, the procedure will go as follows:

1. The divorce is filed
2. The final decree of divorce is written, detailing how debts and assets (including retirement accounts) are to be split.The judge signs it.
3. The Plan Administrator of the retirement account is contacted to find out the proper procedure and recommendations for that particular company’s QDRO.
4. The QDRO is drafted by a company or an attorney.The parties and their attorneys review and sign it.
5. The QDRO is submitted to the court and the Judge signs it.
6. A certified copy of the QDRO which was signed by the Judge is submitted to the plan administrator.
7. The Plan administrator decides the QDRO is acceptable.
8. The funds are split. But, depending upon the plan may not be immediately accessible.

However, problems can arise along the way as follows:

1. The spouse who owns the retirement account may refuse to cooperate with giving information about the Plan, slowing things down.
2. The parties may not agree about who is to pay for the drafting and processing of the document.(This is not automatically part of divorce services performed by lawyers, and can be quite an involved process).
3. The spouse who owns the retirement account may refuse to sign the paperwork, having no incentive to cooperate
4. The Judge may have a problem with the paperwork, or the court may be backlogged
5. The QDRO may sail through approval of the former spouses and get the judge’s signature, only to be turned down by the Plan Administrator. The paperwork will then have to be re-done.
6. The QDRO may go through all the steps above, but then the company or the Plan has a bankruptcy, liquidation, or other financial issues.

In the event of an ex-spouse who simply refuses to sign a QDRO, it is possible to request that the court approve the paperwork without that person’s signature (certain legal procedures must be followed).

Generally the spouse who is the owner of the account has very little incentive to put the time and money into making sure that the QDRO is done.   Therefore, if you are the party who is going to be awarded part of your spouse’s retirement upon divorce, you should be aware of that and plan to “take the lead”  in getting this paperwork properly done and submitted, as well as budgeting for it.    A consultation with a divorce attorney who is familiar with these issues can help you understand all of your options and legal rights.