(Tips for Attorneys when Dividing Defined Contribution Plans)
1. What’s the plan name? Make sure the correct name of the retirement plan is listed in the divorce decree. Some judicial officers will reject a QDRO if the name of the retirement plan listed in the QDRO does not exactly match the name of the retirement plan as listed in the divorce decree.
Your best bet is to verify the name of the plan with the Plan Administrator of the retirement account. You and/or your client can obtain the contact information for the Plan Administrator by contacting the company’s human resources department.
2. Is the award to the Alternate Payee subject to earnings/losses? Specifically, is it intended that the award be a flat dollar amount (i.e. $10,000), or is it intended that the award be subject to market gains and losses (i.e. $10,000 as of the division date plus/minus earnings/losses from the division date through the date of distribution to the Alternate Payee)?
3. If the award is subject to earnings/losses, will the Plan Administrator calculate the earnings/losses for you? Sometimes the Plan Administrator will prepare the earnings/losses calculation; sometimes they won’t. If the Participant and/or his/her employer are no longer contributing funds into the account, you may want to consider converting the dollar amount awarded to a percentage. For instance, if it is intended that the Alternate Payee receive $15,000 subject to earnings/losses and the total value of the account is $110,000, you could instead provide that the Alternate Payee be awarded 13.64% of the total value of the account.
4. What is the division date? Make sure to be clear about the division date. Specifically, is the division date the valuation date, the date of entry of the Judgment and Decree, the date of the transfer of the funds from the Participant’s to the Alternate Payee’s account, or some other date?
5. Who pays the administrative fee? Some Plan Administrators charge a fee to review a proposed QDRO to determine if it is in fact a QDRO. This administrative fee will be taken directly out of the Participant’s account, the Alternate Payee’s account, or both accounts. The amount of this administrative fee can vary. It can be as little as $300 or it can be as much as $1,000. Which party pays this administrative fee? Is it split between the parties equally or proportionately, or is one party solely responsible for paying the fee?
6. Who drafts the QDRO? You, the opposing counsel, another attorney that you hire, or a third-party neutral hired by both parties? If you would like to hire another attorney and/or a third-party neutral to draft the QDRO, you should contact our office at (612) 470-8885. Lisa M. Meier, an attorney in our office, has over 10 years of experience drafting QDROs. She prepares defined contribution QDROs for a flat fee of $300.