Qualified Domestic Relations Order: What is a QDRO?

What is QDRO and how does it work?

A California QDRO is a Qualified Domestic Relations Order.  The purpose of a QDRO is to separate pre-tax retirement accounts without tax consequences to the plan participant and transfer a portion of the participant’s account to the alternate payee following a divorce or dissolution of a domestic partnership.  The alternate payee has the option to retain the tax-free funds in the newly created account, or if the alternate payee wishes to cash out the account, any tax liability will be against the alternate payee and not the plan participant.  An alternative to preparing and filing a QDRO is for the participant to cash out the account (usually with a large tax liability to the participant). The QDRO meaning is that the court orders the plan administrator to divide the account without tax penalty to the plan participant.  There is no tax penalty to the alternate payee if the alternate payee retains the funds in a tax-free account that has been created by the plan administrator, or if the alternate payee rolls their portion of the account balance into another qualified account.

What is a QDRO used for?

A QDRO, also referred to as Qualified Domestic Relations Order or sometimes referred to as Quadro, is used for separating pre-tax retirement accounts without tax consequences to the plan participant and transferring a portion of the participant’s account to the alternate payee following a divorce or dissolution of domestic partnership. After the account is separated, the alternate payee has the option to retain the tax-free funds in the newly created account, or if the alternate payee wishes to cash out the account, any tax liability will be against the alternate payee and not the plan participant.  

How does a pension QDRO work?

A pension QDRO works similarly to a 401k QDRO, except the account that is divided is a pension account and not a 401k account.  The alternate payee’s community portion of the pension is segregated into a separate account for the benefit of the alternate payee.  The alternate payee can start collecting pension payments according to the plan guidelines.  Every plan has different guidelines for withdrawal or distribution.  Using a QDRO for 401k withdrawal or a QDRO for 401k distribution should also be done according to the plan guidelines.  Once an account is created for the alternate payee, the plan administrator will speak directly with the alternate payee and guide them on the proper way to proceed to commence distributions.

How long does it take to get your money from a QDRO?

The process of preparation, filing and QDRO distribution is normally 90-120 days.  There are no set QDRO distribution rules.  Every plan is different when it comes to QDRO 401k withdrawal and QDRO 401k distribution.  Laguna Legal charges $500 flat monthly QDRO fees.  This manageable low monthly fee allows us to help our clients throughout the process regardless of any complications or added paperwork requested by the individual plan administrator.  Each plan administrator is different and may have separate requirements.  

How much does it cost to prepare a QDRO?

Clients are always asking us “how much does a QDRO cost”.  Laguna Legal charges $500 flat monthly QDRO fees.  This manageable low monthly fee allows us to help our clients throughout the process regardless of any complications or added paperwork requested by the individual plan administrator.  Each plan administrator is different and may have separate requirements.  

Who pays the QDRO fees in divorce?

The QDRO fees for a divorce are usually shared by both parties.  The divorce judgment usually specifies who is responsible for payment of the QDRO fees.

Don’t pay expensive QDRO attorney fees. Work with Laguna Legal!

Laguna Legal charges $500 flat monthly QDRO fees.  This manageable low monthly fee allows us to help our clients throughout the process regardless of any complications or added paperwork requested by the individual plan administrator.  Each plan administrator is different and may have separate requirements.