Speaking the QDRO Language

While a professional will usually prepare the Qualified Domestic Relations Order, anyone involved with the #QDRO process must have a working knowledge of the basic vocabulary used during the process. After all, if you’ve never dealt with these legal documents before, you may be confused about Alternate Payee or Plan Participant. However, these are terms you will come across whenever you are dealing with a QDRO, and understanding them is a must.

Alternate Payee – This can be a spouse, former spouse, child, or other dependent of a plan participant, who is recognized by a domestic relations order as having a right to receive all or a portion of the benefits payable under the plan. 29 U.S.C.A. §1056(d)(3)(J).

Plan Participant – This is an employee or former employee who is entitled to a benefit from an employee benefit plan. 29 U.S.C.A. §1002(7).

Defined Benefit Plan – This is an employee benefit plan that qualifies under ERISA and the IRC, which provides benefits to a plan participant based on the participant’s projected date of retirement, typically 65. These benefits continue for the participant’s lifetime. Normally, the benefits available under these plans are funded solely by the employer, with no direct financial contributions from the employee. The individual participant does not have his or her own defined account. Instead, there is a pool from which benefits are issued.

Defined Contribution Plan – This is a plan that qualifies under ERISA and the IRC that provides financial contributions (by the employee, employer or both) to an individual account established and maintained for each plan participant. Most often, these come in the form of a 401(k) or similar.

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If you have a QDRO in your future, visit our website to learn more about these retirement account division tools and the services we provide.