Welcome to FreeDivorce.com.
Christina: This is Christina.
Ed: This is Ed. Today, are going to talk more about how to divide retirement assets using a Qualified Domestic Relations Order, which most people refer to as a QDRO. As mentioned in the previous video, a QDRO is a special type of court order that is essentially a set of instructions telling a retirement plan administrator how to divide a particular retirement asset such as a 401(k) or a pension.
Ed: Christina, can you tell us how to go about getting a QDRO drafted?
Christina: There are two basic options. One option is to hire an expert to draft the QDRO. The experts that are in the business of drafting QDROs are typically accountants or actuaries, although some are lawyers. You can Google “QDRO drafting” and find an expert to draft a QDRO for you. You can expect to pay somewhere in the neighborhood of $500 to $600 per QDRO. Another approach is to draft your own QDRO using a model and instructions provided by the retirement plan administrator or custodian.
Ed: Do all retirement plan administrators provide model QDROs?
Christina: Not all retirement plan administrators provide model QDROs and instructions, but many of them do. Call the administrator for each of your retirement plans and ask if they can mail or email you a model QDRO and a set of instructions. When you receive the model, follow the instructions and prepare your own QDRO.
Ed: Can I get a model QDRO from the plan administrator online?
Christina: Sometimes. Some plan administrators and plan custodians have model QDROs and instructions online, with fillable forms. For example, if Fidelity is the custodian of one or more of your retirement assets, go to qdro.fidelity.com and log in. After you log in, click “create a new QDRO” and then type in the name of your employer or the name of your retirement plan to see if Fidelity has a model for that particular plan. If Fidelity has a model, follow the online instructions and then print your QDRO.
Ed: What do you do with your QDRO after it has been drafted?
Christina: After your QDRO has been drafted, the next step is for you and your spouse to date and sign the QDRO. Some courts will require that your signatures on the QDRO be notarized. The safe approach is to get your signatures notarized. The next step is to get a judge to sign the QDRO. Take your original QDRO and a copy to the court clerk, together with a self-addressed stamped envelope. The court clerk will give the QDRO to a judge to sign. After the judge signs the QDRO, the court clerk will mail you a filed-endorsed copy of the QDRO.
Ed: Do I need to send the plan administrator a filed-endorsed copy of the QDRO or a certified copy of the QDRO.
Christina: Many retirement plan administrators will accept a filed-endorsed copy of the QDRO. However, some plan administrators, particularly when you are dealing with retirement benefits through government entities, will insist on a certified copy of the QDRO.
Ed: What is the difference between the two types of QDROs?
Christina: A certified copy is different than a filed-endorsed copy. A certified copy has an extra seal that the court clerk puts on the copy that certifies that the copy is a true and correct copy of the original document. When you drop off your QDRO with the court clerk, include a cover letter that tells the court you want a certified copy of the QDRO, not just a filed-endorsed copy. Some courts charge a filing fee when you submit a QDRO as well as an extra fee for a certified copy. For example, a court may charge you a QDRO filing fee of $20, plus fifty cents per page, plus another $25 for the certified copy. You are going to need to bring your checkbook or credit card with you when you drop off the QDRO with the court clerk. Ask the court clerk how much you need to pay for the filing fee and certification fee.
Ed: What do I do with my certified copy of the QDRO after I receive it back from the court?
Christina: After you get the certified copy of the QDRO back from the court, make a copy for yourself and a copy for your spouse. Then, take the certified copy and mail it to the plan administrator. When you mail the QDRO to the plan administrator, include a cover letter. Your cover letter will ask the administrator to review the QDRO and confirm that the QDRO is acceptable to the administrator. Your cover letter must also provide the plan administrator with your date of birth, your social security number, your spouse’s date of birth, and your spouse’s social security number. The address of the plan administrator is usually set forth in the QDRO.
Ed: How long will it take the administrator to review and approve the QDRO?
Christina: The plan administrator will take some time to review the QDRO and let you know if the QDRO is acceptable. Some plan administrators will get back to you in a few weeks. Others will take a few months. Some government agencies can take a year or longer. Don’t lose track of the QDRO approval. If you have not heard back from the administrator within a few months, contact the administrator. You don’t want the QDRO to slip through the cracks, which can happen. You need to receive a letter from the administrator saying the QDRO is acceptable.
Ed: What happens if the administrator does not approve the QDRO?
Christina: Sometimes the administrator will send you a letter saying they want revisions to the QDRO before they will consider it acceptable. If this happens, and you used a professional to draft the QDRO, send the letter to the professional. He or she will make the revisions and issue an “Amended QDRO”. If you drafted the QDRO on your own, then you will need to make the revisions yourself. When you make the revisions, include in the caption, just below the case number, the word “Amended”. For example, the title to the revised QDRO could be “Amended Domestic Relations Order Regarding XYZ Corporation 401(k) Plan”. Do this so there is a distinction between the first QDRO you filed with the court and the amended QDRO. After you have your amended QDRO, go through the same process you went through with the first QDRO. File the amended QDRO with the court so a judge will sign it; get a certified copy; then mail the amended certified copy to the plan administrator with a cover letter requesting that the administrator review and approve the QDRO).
Ed: Do retirement plan administrators charge any fees to review QDROs?
Christina: Some retirement plan administrators charge a fee to review a QDRO. Many administrators do not charge any fee to review a QDRO. If a review fee is going to be charged, the administrator will take the fee out of the retirement account. For example, if the fee to review a QDRO for a 401(k) account is $300 when the administrator divides the account pursuant to the QDRO, they will typically deduct $150 from your share of the account and $150 from your spouse’s share of the account. Some administrators charge hefty review fees. You can pay more for a review fee than the amount you paid to have a professional draft the QDRO. Some administrators won’t charge a review fee or will charge a reduced review fee if you use their model QDRO. Fidelity tends to charge very hefty review fees if they have a model QDRO on their website and you don’t use it, but instead hire a professional to draft a QDRO that differs from the Fidelity model.
Ed: In the next video, we will discuss what happens after you have drafted your QDRO and it has been approved by the retirement plan administrator. We also talk about how to reduce the number of QDROs you need and how to divide IRA accounts without QDROs. In our final video in this-four part series, we will discuss when you need and don’t need to join the retirement plan administrator to your divorce case.