Understanding QDROs and Avoiding Common Pitfalls

As if divorce is not complicated enough, on top of all of the decisions to make and paperwork to complete, you have to learn a whole new language as well.  You may hear your lawyer or financial adviser throwing around words like “quadro” and think to yourself “what the heck is a ‘quadro’!?!?” In this post, I will discuss what it is, why you care and how to avoid making mistakes that could cost you tens of thousands, if not hundreds of thousands, of dollars.

What is a QDRO?

So, what is a “quadro” anyway.  Well actually, it’s a QDRO which stands for Qualified Domestic Relations Order.  Rather than say all of those words, or even all the letters, most divorce practitioners just shorten it to “quadro” which makes it clear as mud, right?

A QDRO is a document that is required in order to divide retirement assets from qualified plans (like 401ks and pensions) related to a divorce.  While you can use your divorce agreements to divide other assets like bank accounts and investment accounts, you need a special document in order to divide these specific retirement accounts.  And the best part?  It’s not always drafted as part of the divorce filing so you need to either specifically ask your lawyer to do it or hire another professional to draft it for you.  And then it is your responsibility to have a judge sign it and to send a certified copy to the Plan Administrator to approve and pay out.

Why is a QDRO Necessary?

Company retirement plans are governed by the Employee Retirement Income Security Act (ERISA), which was designed to safeguard the rights of retirement plan beneficiaries.  It is this act that requires a court order to allow an employer-sponsored retirement plan to pay benefits to an alternate payee in lieu of the employee.  While it is meant to protect the rights of the employee, it adds another layer of complexity to your divorce.

A Plan Sponsor (the company that holds the retirement plan for the employee) will not divide retirement accounts related to a divorce without an approved QDRO, regardless of what the divorce decree states in terms of the split of assets.  In order to get what is owed to you, you will have to complete this document and file it, there is no other option.

Common Pitfalls and How to Avoid Them

The biggest mistake that I see related to QDROs is a failure to file them.  Once the QDRO is drafted and signed by the judge, you will need to get the certified copy and send it to the Plan Administrator.  By this point in the process, you may be exhausted by the whole thing and ready for it to be over.  However, don’t delay or forget this crucial step.

While there isn’t an official time limit in filing the QDRO, if you wait too long you can lose all of your rights.  For example, if your ex-spouse does any of the following, you may lose out on your share of the retirement benefits:

  • Remarries
  • Retires
  • Dies
  • Gets fired or quits
  • Withdraws funds from the plan.

See what I mean about mistakes that can cost hundreds of thousands of dollars?  It might be an administrative headache to file the QDRO, but it can also be the biggest step toward financial security after a divorce.

Another common issue to watch out for is filing the QDRO and then taking the money out in cash.  If you take a lump sum from the retirement plan rather than moving the funds over to a retirement account like an IRA, you will end up paying taxes on the entire amount (although you will avoid the 10% early withdrawal penalty because it’s related to a divorce).  Make sure you have a plan for the money, and you know the rules so that you don’t end up with an unexpected tax bill.

The Role of Financial Professionals

As is true with many details related to divorce, having the right professionals in your corner can help you understand what needs to be done and avoid costly mistakes. 

There are several financial professionals that you may consider to help you with this process:

  • Certified Financial Planner
  • Certified Divorce Financial Analyst
  • Certified QDRO Professional

All of these professionals understand the importance of the QDRO and all of the considerations you need to keep in mind.  They can also help as an accountability partner in making sure you get everything documented and filed as soon as possible, as well as troubleshooting any issues along the way.

Understanding and remembering all of the things you need to do in order to successfully complete your divorce is no small task.  And for many Americans, their largest assets are their home and their retirement savings.  So, if you want to get your share of the marital retirement savings, you must ensure that you get your QDRO prepared and filed with the Plan Administrator as soon as you can.

If you are interested in learning about how I can help you take charge of your finances as a newly single woman, please contact me at  or schedule a free 20-minute consultation.

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