Going through a divorce is a challenging undertaking. You must ensure that you’re making decisions that are in your best interests. Your ex is going to do the same.

For many people, dividing retirement accounts during divorce is stressful. Only when parties have their own accounts and those accounts are roughly equal in value is this particular asset division issue relatively straightforward. Outside of that scenario, dividing financial assets, like 401(k) accounts, can be a complicated process. One option that spouses may wish to consider involves enacting a QDRO.

1. Only certain plans require a qualified domestic relations order

QDROs are only required for plans that are covered by the Employee Income Security Act. This classification doesn’t include IRAs. A QRDO can affect a former spouse, children, and anyone else who is considered to be a dependent.

2. Plan administrators can deny a QDRO

Plan administrators can deny a QDRO if there’s anything incorrect with it. The order must include very specific information, including:

  • The payee’s name and address
  • The plan participant’s name and address
  • Identifying information for each plan included in the QDRO
  • Percentage or dollar amount that must be paid to the payee
  • Type and duration of payments, such as one-time or installments

If the plan administrator denies a QDRO, it will be returned for clarification. The court can correct the QDRO so the plan administrator can follow the corrected orders.

3. Limitations apply

A QDRO can’t require a plan to pay out any benefit amounts that aren’t part of the plan. There’s also a limitation in re: how many people can benefit from a QDRO tied to one account, so if a retirement plan already has a QDRO attached to one person, another QDRO can’t take away that other person’s benefits. QDROs are applicable based on a first-come, first-served basis.

Before committing to implementing a QDRO, take time to learn about all of your options concerning property division during divorce. Working with someone familiar with cases similar to yours can be beneficial because you can draw on their experience. Remember that you must consider how each option may impact your future, not just your present.