QDRO Corner: What is the Process to Draft a QDRO?
A QDRO or COAP is specifically drafted for each retirement plan. Federal law requires that certain items be included in the QDRO, such as the participant and alternate payee’s last known mailing addresses, and the amount to be transferred to the alternate payee. However, plans can require that additional, more administrative language be included in the QDRO, such as what happens if the plan over or under pays the alternate payee, or when the alternate payee is allowed to designate a beneficiary.
In order to know the special requirements of each plan, we have to receive these terms from the plan. Some plans have these terms readily available to share and can email them upon request. Other plans require that the plan participant request the terms and share them with us. Other plans insist on mailing the terms rather than emailing. The speed with which a plan can provide the information greatly impacts how quickly the QDRO can be prepared.
Once we have these terms from the plan, we’ll draft the QDRO in accordance with the settlement agreement or court order. For any required term that is not addressed by the settlement agreement or court order, we’ll advise as to the options of how to address it. Sometimes there are terms in the settlement agreement or court order that are prohibited by the plan, and we’ll consult with the client to figure out the closest allowable option. We’ll also have a call with the client to review the QDRO to ensure the client understands the QDRO, and how the company will handle processing the QDRO once it is finalized.
In addition, many plans will review a draft QDRO (ie: before it is submitted to Court) to ensure its compliance with federal law and the terms of the plan. This is beneficial for multiple reasons, but mostly to ensure that once a document is executed by the Court, the parties know that it will be accepted by the plan. However, the biggest down side is that many plans take 30-45 days to complete the review and then mail a letter describing the outcome of the review to our office. In many cases, the letter from the plan states that once the QDRO is signed by the judge, it will be accepted by the plan.
Alternatively, if a QDRO does need to be revised before it can be accepted by the plan, the letter from the plan will clearly state what changes need to be made. As a matter of course, we submit the draft to the plan to review, and the leave it to the client if they would like to wait for the response before submitting to the Court.
