What Is a QDRO? Splitting a Pension or 401(k) in Divorce

A QDRO, or qualified domestic relations order, is a court order that tells a workplace retirement plan to pay part of an employee's benefit to a former spouse, child or other dependent. Federal law normally bars a plan from paying anyone but the employee, and a QDRO is the exception (29 U.S.C. § 1056(d)(3)). The divorce judgment says how the benefit is split; the QDRO is the separate order the plan needs to actually do it.

Type of account	What divides it	Who approves it
401(k), 403(b) or other private employer plan	QDRO	The plan administrator, after the court signs
Private pension (defined benefit)	QDRO	The plan administrator
IRA	Transfer under the divorce decree; no QDRO needed	The IRA custodian
Federal civil service pension	A court order acceptable to OPM	Office of Personnel Management
Military retired pay	A court order under federal law for military pay	Defense Finance and Accounting Service
State or city pension	An order under that plan's own law	The plan

IRAs don't need a QDRO: a transfer to a spouse or former spouse under a divorce instrument isn't taxed, and the account becomes the recipient's IRA (26 U.S.C. § 408(d)(6)).

Figure the share with the time rule

Many courts split a pension with the time rule: the marital part is the share of service earned during the marriage, and the former spouse gets a percentage of that part, often half.

With the defaults, 144 of 300 months of service fell during the marriage, so 48% of a $2,400 monthly pension is marital, or $1,152. Half of that is $576 a month to the former spouse. Your judgment may use a different formula or a fixed amount.

What a QDRO has to say

Under 29 U.S.C. § 1056(d)(3)(C) and (D), the order must:

• name the employee and the person receiving benefits, with their last known mailing addresses;
• state the amount or percentage of benefits to be paid, or how to calculate it;
• state the number of payments or the period it covers;
• name each plan it applies to;
• not require the plan to pay a type or amount of benefit it doesn't otherwise provide.

The plan administrator decides whether the order qualifies. Many plans publish a model order and will review a draft before the court signs, which can save a round of corrections.

Taxes when the money is paid

A former spouse who receives money from a 401(k) or pension under a QDRO pays income tax on it, as the employee would have. But distributions to an alternate payee under a QDRO are exempt from the 10% additional tax on early withdrawals (26 U.S.C. § 72(t)(2)(C)). That exception doesn't apply to IRAs (§ 72(t)(3)(A)). Rolling the money into your own IRA keeps it tax-deferred, but then IRA rules apply to later withdrawals.

Mistakes that cost money

1. Finalizing the divorce without a QDRO, then trying to get one years later after the employee retired, remarried or died.
2. Leaving out survivor benefits. Without them, payments can stop if the employee dies first.
3. Not saying who gets gains and losses between the split date and the transfer.
4. Using a generic order instead of the plan's model.
5. Splitting an IRA with a QDRO, or a 401(k) with only the decree.