As you will see in Sample 9, Sections 9 and 10, it contains both preretirement and postretirement survivorship protection for the alternate payee. You will also see in Section 8 that the alternate payee must wait for the participant to retire before she can commence her share of the benefits.
6. QDROs for Defined Contribution Plans
When drafting a QDRO for a defined contribution plan, such as a 401(k) plan, you don’t have to worry about separate interest versus shared payment QDROs. Those types are applicable only to defined benefit pension plans. There really is only one type of QDRO for a defined contribution plan — it essentially states how much of the participant’s total account balance goes to the alternate payee. QDROs for defined contribution plans are much easier to draft and understand than are those for defined benefit pension plans.
See Samples 11, 12, and 13 for samples of defined contribution plan QDROs. The essential differences between these three models can be found in Section 7 of the QDROs. In Sample 11, the alternate payee simply receives 50 percent of the participant’s total account balance as of the date of divorce.
4
Do You Need to Get an Attorney to Draft a QDRO? (What If You Can’t Afford One?)
If you were awarded a portion of your ex-husband’s pension benefits when you divorced (as part of the property settlement or separation agreement), you should first check with the attorney who handled your divorce to see if a QDRO was drafted for you at that time. If the answer is yes, you should then contact the pension plan administrator to inquire about the qualified status of the QDRO. In other words, you should see if the plan administrator accepted the QDRO. If no QDRO was ever drafted for you, or if the plan administrator rejected your attorney’s draft of the QDRO, then you now have a new first priority. Get the QDRO drafted and approved right away. Failure to do so could result in your forfeiture of any pension benefits that were awarded to you in your judgment entry of divorce or separation agreement.
1. Contact Your Original Divorce Attorney
Start by contacting the same attorney who represented you during the divorce. Once you let him or her know that the QDRO issue was never finalized and that you are sitting in “limbo” regarding your property interest in the pension, it is possible that he or she will do whatever is necessary to secure your share of the pension. It’s also possible that the attorney will do it free of charge in order to close this potential malpractice trap — especially if your account was paid in full when you divorced. Remember, your attorney should have handled the QDRO preparation for you when you divorced. Unless agreed otherwise, it was your attorney’s duty to perform the necessary steps to secure your rights to the pension at the time you divorced — not later. It may be necessary for you to remind him or her of this fact.
2. Contact a New Family Law Attorney
If you don’t get any satisfaction from contacting your original divorce attorney (or if you discover that he or she retired and opened a Starbucks), it may be in your best interest to find a new family law attorney to handle the QDRO drafting for you. You may have to interview several attorneys before you find one who is somewhat comfortable with QDROs (whether they draft QDROs themselves or outsource them to a QDRO expert). If you have moved away since the divorce, find an attorney in the same jurisdiction (county) where you were divorced. Because the QDRO document is a court order, it should be signed by a judge in the same jurisdiction where your divorce took place, and preferably by the same judge who handled your divorce case (if he or she still sits on the bench).
It may also be in your best interest from a cost perspective to shop around. If the attorney is going to charge you $1,000 or more to draft your QDRO, keep looking. The QDRO process should not be very expensive — perhaps $300 to $600. Don’t be afraid to spend this money, though, if it means securing a lifetime of pension income. It’s not a bad trade-off. In any event, you should beg, borrow, or, well, don’t steal, to find the money to get the QDRO done. Every single day that you delay could be the day that your ex-husband either retires, quits his job, or dies. And if that happens, it could be too late for you to draft a QDRO. You will then receive none of the pension or savings plan benefits that were awarded to you in the divorce decree.
3. Try to Draft a QDRO Yourself Using a Sample QDRO from this Book
If you do not want to look for a attorney to draft your QDRO, do not be afraid to go it alone by using one of the sample QDROs included in this book. It’s likely that the QDROs in this book are vastly superior to those used by many divorce attorneys. Most divorce attorneys are not familiar with the QDRO laws and will, perhaps in their own ignorance, rely on a QDRO template provided to them by your ex-husband’s employer. You should understand that most companies do not care about your QDRO rights. Because of this, most model QDROs provided by the company itself are “plain vanilla” and often do not include many protective clauses that should be included in your QDRO. If you are somewhat reluctant to pursue QDRO preparation on your own, you may want to show your attorney the sample QDROs contained in this book — why pay him or her to do independent QDRO research, when it’s right here in front of you? And by using the QDRO forms in this book, your legal fees could be substantially reduced. Remember one thing, however. I have drafted and reviewed more than 40,000 QDROs, yet even my QDROs are rejected from time to time. Do not be ovely alarmed if your QDRO is rejected. Stay diligent, and correct any deficiencies immediately on hearing back from the plan administrator.
Let’s assume that your divorce decree included language that awarded you 50 percent of the total account balance in your ex-husband’s 401(k) plan as of February 15, 2002 (your date of divorce). You could try using Sample 11 — which is meant to be used when assigning to an alternate payee 50 percent of the participant’s total account balance under a defined contribution plan.
If you do attempt to draft the QDRO yourself by using one of the samples in this book, remember, a QDRO is really a court order that is signed by the judge. When typing the QDRO, you should have available to you a copy of your original divorce decree. All court orders, including your QDRO and your original divorce decree, must have a caption at the top of the first page of the order. The caption is the top part of the court order that includes the name of the case, the number of the case, the name of the judge, and the name of the order. Also, a vertical line of parentheses usually divides the left part of the caption from the right part. Be sure to include a caption at the top of your QDRO. You can use the same caption as was used in your divorce decree, but where it says “Decree of Divorce” or something similar to that on the right-hand side of the caption, you should include the words “Qualified Domestic Relations Order” to show that the document you prepared is a QDRO and not the original decree of divorce.
3.1 Step-by-Step Instructions for Completing a Sample QDRO Yourself
You don’t have to be an attorney to complete the sample QDROs found in Chapter 19 of this book. Don’t be afraid of some of the legal-sounding words or phrases found in the sample QDROs. Most individuals can understand a QDRO when they read it carefully. Following is a section-by-section description of Sample 11. Again, this sample QDRO is used for providing you with 50 percent of the account balance as of the date of divorce under a defined contribution plan.
3.1.a Section 1
Section 1 of the QDRO is considered boilerplate. That means it’s a form of legalese. Just type it and forget about it. It simply states that the order is considered to be a QDRO in accordance with federal QDRO laws found in Section 414(p) of the Internal Revenue Code and under the federal pension law known as ERISA.
3.1.b