A QDRO can be entered prior to or on the date the final judgment is entered, and in fact, it is recommended to do so. Many believe that QDROs can only be drafted after the final judgment, which is why 90% of the QDROs we receive are post-divorce. Nothing could be further from the truth as the Internal Revenue Code, as well as ERISA, and even legislation affecting government retirement plans, define an alternate payee as a spouse, former spouse, or dependent. In most cases, and with most plans, this does not limit the timing of when the QDRO is entered. From a liability perspective, it ought to be at the time of divorce – or prior if the settlement of the retirement accounts are already established.
In Delores R. Williams v. Law Firm of Cooch and Taylor, a case stemming from the State of Delaware, a law firm was sued by a client because the law firm did not implement a QDRO pursuant to the divorce proceedings. In this case, the attorneys waited, or perhaps forgot or ignored having the QDRO entered, and the husband depleted the funds. The defendants (Law Firm of Cooch & Taylor) requested a summary judgment, which was granted on two other issues but denied on the issue of the QDRO. The lesson here? Follow through to ensure that not only is the QDRO prepared correctly, but is entered, too!
Not only should the QDRO be entered, but a certified copy must be forwarded to the plan administrator, which some attorneys have learned the hard way. In one such malpractice case, the attorney never sent in the QDRO to the plan, even though the attorney had the QDRO signed by the judge. In this particular case, the husband died. No QDRO, no distribution to the former spouse.
Tim Voit is the author of Federal Retirement Plans in Divorce – Strategies and Issues, available through www.vecon.com, and Retirement Benefits & QDROs in Divorce, a CCH publication.