Home   Contents  Accounting   Age Preference   Alimony Loading   Books and Law   Buzzwords   Choices   Deadbeats   Discipline for Lawyers and Judges   Dissomaster   Disso Check   Disso-Opoly   Domestic Tax Law   Domestic Violence   Facts & Opinions    Food Reviews  Grandparents    Hardships   Hearings   I.R.S. Form W-5   Military I   Military II  Military III   Military Pay III 1/2   Moveaways   Notice Summary   Noticed Motion   No Service  Premarital Contract  QDRO's  Relief Motion   Restraining Order Motions   Stock Options   Statements of Decision   SOD Checklist   Social Security   Tax Forms of Value   Tax Tips 2007   Tax Page   Transmutation

Professor Nedley Series

"QDRO's"

Qualified Domestic Relations Orders

    A Qualified Domestic Relations Order is a terribly misunderstood, yet simple legal document.  Unheard of by the very people that are most affected by the order, feared by their lawyers because it somehow involves the Internal Revenue Code over which they have no control and confused by the companies and trusts that must deal with them, because their tax advisors drafted the language with which they must comply.  This web page is for the sole purpose of helping everyone just "get along" and understand what it is that congress was trying to do back in 1984 when they passed the "Tax Simplification Act".

What is It?: A QDRO is a creature of the Internal Revenue Code and the Tax Simplification Act of 1984.  The term QDRO stands a for Qualified Domestic Relations Order.  A Domestic Relations Order (DRO) (The more correct term or acronym - DRO - never seemed to catch on like the term QDRO, the Professor knows  not why) is simply a family law order made by a state court in a family law action. The order may cover property division, alimony, child support and includes payments made to a spouse, former spouse, child or other dependent of a plan participant  In California any Superior Court judge or commissioner can make such an order in a pending divorce or separation case.  The lesson in this paragraph is that just because you've settled the case or gotten an order out of the judge you still don't have an enforceable order.

What Kind of Private Plans Are Covered?:  A QDRO applies to qualified plans including 401(k)'s, 403(b)'s, and 457's.  A QDRO may be used to divide the entire contents of an IRA and in doing so the tax hit may be deferred by placing the money into another qualified IRA under the control of the Alternate Payee as opposed to the Plan Participant. (See  Pub 575 Pensions and Annuities)

What it is Not: A DRO that has not been qualified is NOT a QDRO.  A QDRO under the Internal Revenue Code applies only to private employer's plans, therefore by definition (with a unique exception*) QDRO's do not apply government plans such as PERS, STERS or JRS.  They also are not applicable to military plans, so it is incorrect to say "I'll have my people draft a QDRO and we'll submit it to DFAS to get those military benefits paid to my client".  The lesson in this paragraph is to limit the way that you toss around the term "QDRO', You'll sound a lot more knowledgeable if you simply refer to the order as "the order" or "the plan order". (* The University of California Retirement System (UCRS) refers to their plan orders as QDRO's, but the Internal Revenue Code Provisions do not apply)

Isn't the Judges Signature All That I Need?: No.  The Judge's signature has simply created an order that so far lacks all of the power and perks (such as enforcement) given to a QDRO by the tax code.  The lesson here is that Federal rules trump state judicial power.  Heck, the judges spouse trumps judicial power.

When is it Qualified?:  It is qualified when the designated representative of the employer or union's  pension plan trust has reviewed the order (DRO) and says that it is qualified.  Until then it is simply an order.  A state court has no power to order that a plan be qualified.  The Department of Labor  believes that qualification orders must come from Federal Court. The lesson here is that there is probably a clerk somewhere that does all of the work and controls the whole shebang and you'd darn well be smart to treat him/her well and seek their assistance in completing the job and thank them nicely when your all done.

Why Does Anyone Care?:  If my spouse agrees to pay me my share of the plan payments and he/she is trustworthy, why do I want to go to the expense of preparing a QDRO?  All distributions from a qualified pension plan are taxable to the plan participant and without a QDRO even though the payments are made as scheduled they remain taxable in their entirety to the plan participant.  This is not a good result for the participant or the participant's lawyer.  This is tracked through the inevitable 1099P.  Once "qualified" the tax burden may be shifted to the Alternate Payee  An exception to burden shifting would be child support.

How to Draft a Qualifiable DRO: