Providing Divorce Mediation Services Throughout California
Providing Divorce Mediation Services Throughout California
Dina Haddad and her team provide expert mediation services for Californians. If you want help related to any family law issue, call us or book a consult.
Dividing retirement accounts and pensions in California is an important part of California divorce financial planning.
In California, this process is governed by community property law. To divide employer-sponsored retirement accounts, a Qualified Domestic Relations Order (QDRO) is required.
We work with California couples to choose which method works best for them and or determine alternative ways to divide your pension, such as a buyout or waiver. Schedule a free consultation with our expert mediation lawyers for the best approach and your unique situation.
A QDRO (Qualified Domestic Relations Order) is defined as an order that divides retirement funds according to domestic relations laws.
In California, the marital share of retirement accounts will be divided as part of your divorce financial plan. A QDRO may apply to qualified plans covered by ERISA, such as 401(k), pension, etc. However, it does not apply to IRAs, since they have different requirements.
The terms “QDRO” and “Quadro” mean the exact same thing. Although there is no specific statute of limitations, delaying can lead to increased risk. A QDRO is commonly necessary when dividing retirement assets, including 401(k) divisions.
Family First Mediation helps clients choose which method works best for them and coordinates with experts, like Madelin e Hill or the office of Moon, Madden and Schwartz.
Divorce retirement planning requires a QDRO to legally divide your retirement. The judge can’t make the retirement fund pay out, even though you both agreed in your divorce that you would each get half of it.
In California, the courts view QDROs as being strictly “technical” and therefore strictly “compliance driven”. The typical steps are as follows:
Who is responsible for paying the costs associated with preparing the QDRO? Either parties split the costs, or one party is responsible to pay the cost.
It is possible for parties to file a QDRO on their own (without hiring an Attorney); however, this may not be recommended because of the complexities involved.
Also, note that depending on the plan requirements and details needed to complete the QDRO, the costs can vary from approximately $800-$1500+
A QDRO is mainly for the non-employee spouse (alternate payee), who wants their share of retirement assets, based on community property law.
Even though a divorce decree or certificate provides that you have received your “fair share” of the money in the divorce settlement, unless you can get a qualified domestic relations order (QDRO), no money will be disbursed from the plan administrator. QDROs apply to ERISA-qualified plans such as:
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Plan/Account Type
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Requires QDRO
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What You Need Instead
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||||||
|---|---|---|---|---|---|---|---|---|
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401(k) Plan
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Yes
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QDRO
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||||||
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403(b) Plan
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Yes
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QDRO
|
||||||
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Defined Benefit Plan
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Yes
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QDRO
|
||||||
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ESOP
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Yes
|
QDRO
|
||||||
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IRA
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No
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Transfer incident to divorce
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||||||
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Military Retirement
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Yes
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But special rules
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Governmental Plan
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Yes
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DRO or plan-specific order
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||||||
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Non-Qualified Deferred Comp
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Sometimes
|
Plan-specific order
|
A QDRO is needed to divide the marital part of an Employee Retirement Income Security Act (ERISA) qualified pension. Timing is also important.
The benefits may be lost if the participant (employee) has retired, or died prior to entering into the Qualified Domestic Relations Order (QDRO).
Therefore, filing the QDRO during, or as close in time as possible to the divorce proceeding, reduces the likelihood that there will be loss of benefits or improper distribution.
A specific time limit for filing a Qualified Domestic Relations Order (QDRO) does not exist in statute. However, a delayed filing of a QDRO will add risk, further affecting divorce financial planning.
A safe approach to obtaining the Qualified Domestic Relations Order would be to have it completed as part of your divorce or shortly after entry of judgment.
If you wait until later in the process to obtain the qualified domestic relations order, many additional problems could arise, including the participant’s retirement or death before completion of the order. If this occurs, the alternate payee may not receive payment of plan benefits.
If the Participant made contributions prior to marriage, you would only be able to divide those contributions that were made to the Plan during your marriage.
This is usually accomplished through an actuarial allocation. However, early withdrawal may result in tax and penalty consequences.
In California, a QDRO usually takes 3-6 months or longer to prepare and costs approximately $800-$1500 to draft. The time it will take depends on how cooperative both parties are and on the speed at which the plan administrator can process your QDRO request.
Time is mostly spent on:
Additional costs for drafting a QDRO will depend on the type of retirement plan, the type of account, and the level of experience of the person creating your QDRO document.
You may also incur some additional expense, such as joinder fees (court fees), court costs and/or other costs associated with the plan’s pre-approval process.
Uncontested QDROs are faster than contested cases.
A mediator will not prepare a Qualified Domestic Relations Order (QDRO) in a divorce. Preparation of a QDRO is a special legal function that requires training as a qualified domestic relations order professional.
A mediator could provide legal counsel or represent one party in this regard, as mediation is based upon neutrality.
Strategy development is an area that mediation excels at; it allows parties to consider all their options prior to establishing a specific QDRO. Parties often find alternative strategies are both more flexible and cheaper than the QDRO. Alternative strategies to a QDRO include:
Compared to QDROs, these alternatives have advantages from an administrative standpoint, require fewer steps and generally result in faster resolution times. On the flip side there are also trade offs.
Buyouts require current valuation of assets and projections regarding future benefit payments. In addition, buyouts do not provide the same level of structural division of funds as does a QDRO.
Private mediation is best for creating personalized solutions, tax-aware decisions, and clearer long-term planning. Learn more about high net divorce mediation here.
Family First Mediation will provide you with an understanding of how to strategize for QDROs in divorce, but it does not prepare QDROs. Preparation of QDROs is a specialized area of law that goes beyond what a mediator can do in their neutral role. Therefore, we will refer to our trusted specialists (such as Madeline Hill) without receiving any compensation for doing so.
Our focus is on helping you develop a strategy by providing you with information about your options, structuring agreements, and evaluating other possible alternatives, such as buy-outs or waiving your community property rights.
A strategic approach may result in better outcomes than a strict application of the QDRO split guidelines when there are complex or high-net-worth issues involved. Book a free consultation with our expert mediation lawyers to discuss your options and create a plan based on your financial objectives.
The average cost of hiring a qualified QDRO attorney in California will vary depending on your specific situation; however, you can expect to spend anywhere from $800-$1500+ for each order entered into. The higher end of this estimate will include complex plans with disputes, as well as litigation and/or revisions.
In general, who is responsible for filing a QDRO is determined by the divorce judgment. In many cases, either spouse may initiate the filing of a QDRO; however, the spouse receiving the retirement benefits (“alternate payee”) is the one who typically files the QDRO.
While it is technically possible to file a QDRO on your own, many people hire attorneys who specialize in this area because of the technical nature and specificity of each plan and its associated requirements.
You can create and file your own QDRO. However, a QDRO is subject to very strict regulations, which require compliance with both state and plan requirements. Therefore, creating a QDRO yourself carries the risk that errors could delay processing or even cause the denial of your request.
