Unconventional QDRO Uses: Can a QDRO Require that a Participant Receive Payments By a Specific Date?

When dealing with the division of pension interests one of the first questions to ask is should the division be done as a shared or separate interest. In short, the separate interest division gives the former spouse/alternate payee authority in when they will begin to receive pension benefits, with little to no restrictions based on the Participant’s decisions, and is paid over the former spouse/alternate payee’s lifetime. With a shared interest division, the former spouse/alternate payee will only receive benefits if, as, and when the Participant does, and requires a survivor benefit to continue to receive benefits if they outlive the Participant.

In a shared interest division, which may be the only kind of division available the former spouse/alternate payee usually wants some kind of guarantee or at the very least notice of when the Participant will begin to receive their benefits. This desire is completely logical – for retirement income planning it’s important to know when income from each source will be received.

So many people ask, can we include in the QDRO that the participant will retire and begin to receive pension benefits on or before a certain date, and the answer is no, we cannot. A QDRO is instructions from the Court to the retirement plan for how to divide the plan benefits once they are being paid, in accordance with the plan’s existing payment rules. Under no circumstances does the retirement plan (divorce or otherwise) have the authority to require the participant to retire and begin to receive benefits. Therefore, the QDRO cannot create that authority.

So the next question that we’re asked is could that language be included in a settlement agreement, or can it be asked of the judge in a trial? This answer completely depends on state law, so it’s best to consult with a local family law attorney for specifics.  

Is the former spouse/alternate payee then left to the whim of the participant in a shared interest division?

Unfortunately for the former spouse/alternate payee that answer is yes. The most helpful provision in an agreement that we’ve seen, which can be put in the QDRO is that the participant waives privacy with respect to their pension benefits so that the former spouse/alternate payee can receive information from the pension plan as to when the participant may be retiring and the amount of the participant’s benefit.

This does not mean that the pension plan will take the initiative to reach out to the former spouse/alternate payee to notify them that the participant has filed to begin receiving benefits. Rather, it means that the former spouse/alternate payee may reach out to the pension plan to see if the participant has filed to begin benefit payments. If so, the pension plan would also have benefit payment estimates prepared that they could share with the former spouse/alternate payee. The pension plan will not likely run additional estimates at the request of the former spouse/alternate payee if they were not already prepared for the participant. This waiver of privacy is simply access to existing information.

Are there any exceptions to this?

In a presentation from an attorney in California, we heard of a law in California that could require the participant to begin making direct payments to their former spouse if the participant were of retirement age but continued to work. The presenter explained this came from a case where an employee continued to work out of spite, hoping to work until their death so their former spouse would not receive a penny of their pension. The court allegedly required the employee to begin making payments to the former spouse from his salary until he began to receive benefit payments from his pension. The presenter also stated that a few other Western states were considering similar laws. (DISCLAIMER: this information is included to show the differences between states across the nation. Attorneys at Markham Law Firm are not licensed to practice in California. We are relying on the information presented by the California attorney as of 2022, and California’s laws may have changed since then. It is important to consult with an attorney in each state in which your divorce may occur so you can choose the state that makes the most sense for your circumstance.)

It seems unlikely any such ruling would occur in Maryland or the District of Columbia any time soon.