Key Mistakes in QDROs

Qualified domestic relations orders involve great detail and thorough execution and any kind of small mistake can undo their purpose. Some of the most common issues involve misunderstanding a type of plan, not designating the exact name of the plan, and trying to divide a plan that cannot be divided. As it relates to misunderstanding the type of plan, a defined contribution plan is different from a defined benefit plan, and these are both different from what's known as a hybrid plan. The need to designate the exact name of the retirement plan is essential. Instruction in a divorce settlement to divide the husband's plan using those exact terms neglects the determination of plans under different employers, for example, and this can result in division being made of only one plan whereas six more intended. The final most common error in qualified domestic relations orders has to do with trying to divide what cannot be divided. You need to determine if the respective plan is or is not covered under government regulations known as ERISA. Certain high level executive golden parachute plans, for example, are specifically designed to allow a split. Others may be barred from being divided. Having a thorough accounting of all possible retirement plans and understanding what can and cannot be divided is essential during this process. Make sure you hire a qualified domestic relations order expert who can advise you about the importance of the details in the actual order itself. It is imperative that the correct information be recorded in the QDRO from start to finish. This is why you should first hire a qualified domestic relations order expert who can review your materials and help you understand how to avoid some of the common stumbling blocks. Do not hesitate to get help as soon as possible.

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