If you are going through a divorce, you may be counting on a share of your ex-spouse’s retirement benefits to help you buy a new home, go back to school or, if you’re already retired, just make ends meet. This article will help you get an idea of the time it takes to secure rights to your ex-spouse’s retirement benefits.
How Long Does a QDRO Take?
It typically takes a minimum of two months from start to finish to obtain a “qualified” domestic relations order, or QDRO. But it can also take up to two years because, like answers to all legal questions, it depends on the facts and circ*mstances of your situation.
There are two situations where the time period is on the shorter side: if your divorce attorney takes most of the steps necessary to draft a QDRO during your divorce process; or, in the case where your divorce is final, your agreement language is well-crafted and detailed. In these situations, the timeframe should be two to three months at the most.
But the majority of the individuals that need a QDRO do not fall into the above situations, because most divorce attorneys do not take the steps to gather information and understand the retirement benefits at issue during the divorce process; many wrongly believe that you need a final judgment of divorce to obtain a QDRO, though ERISA (the law governing QDROs) does not require a final divorce.
If your divorce is final, it typically takes quite a bit longer to get through the QDRO process. The reasons for this are primarily threefold: 1) the necessary retirement plan (or IRA) information and procedures have not been obtained; 2) the language used to divide the retirement benefits in the separation or settlement agreement is ambiguous and/or incomplete; and 3) there is no real leverage to get the cooperation of the retirement plan participant, which is often needed because of the first and second reasons listed here. The obstacles that arise because of these factors can add many months to the process of obtaining a QDRO.
How Long Does It Take to Process a QDRO?
The word “process” in this context refers to a few discrete sets of processes. Initially, there is the process of drafting the order based on the separation agreement, and obtaining the approval of the ex-spouse or his or her attorney, usually as a “post-divorce” process (though, as noted above, it is more efficient to fold this work into the “pre-divorce” process).
After obtaining the approval of both spouses, there is an “administrative” process that relates to the retirement plan: obtaining the retirement plan information needed to draft the QDRO, and (at another, later stage) obtaining the plan’s “pre-approval” of the QDRO.
There is also a “legal” process that requires one of the parties to submit the (hopefully pre-approved) order to the court for signature, then re-submit it to the clerk for filing and, finally, obtain a certified copy of the signed and filed order. Depending on the court, this “legal” part of the process may require anywhere from one to three separate steps.
Last but definitely not least, there is a final “administrative” process with the retirement plan, whereby the plan administrator deems the order “qualified” and issues an interpretation letter which, hopefully, reflects the parties’ intent and ends the QDRO process.
How Long Does It Take to Receive Funds From a QDRO?
The answer to this question depends on what type of retirement plan is being divided. If it is a defined contribution plan (a 401(k), 457, 403(b) or similar plan), or an IRA, the funds are typically transferred into an account in the alternate payee’s name within two to five weeks. Once the transfer takes place and the funds are separated into his or her name, the alternate payee may request a distribution of some or all of the funds, and/or roll them into another, similar plan or an IRA.
If the alternate payee is receiving a share of a defined benefit plan, such as a pension or cash balance plan, those benefits are not available until the participant reaches “earliest retirement age” under the plan, typically age 62 (When Can a Retirement Plan Distribute Benefits?), though in some cases it can be earlier, depending on the plan provisions.
If a defined benefit plan participant is already retired when the QDRO is approved, then typically the pension plan will begin splitting the monthly benefit the month following approval, though this might vary by plan. Depending on how the QDRO was drafted, the alternate payee may be entitled to begin his or her benefit payment stream separately and independently from the timing of the participant’s start date, so long as the participant has reached the earliest retirement age under the plan.
Recap: How Long Does a QDRO Take?
There are many factors that play into the time-frame for processing a QDRO and ultimately receiving the benefits. If you have questions about how soon you or your ex-spouse will receive benefits under a QDRO, McKain Law will be happy to review your situation to see if we can assist.
