A Qualified Domestic Relations Order (or QDRO) is an order that establishes how a qualified retirement or pension plan will be divided during a divorce. “Qualified” plans are also called ERISA plans. They are 401k retirement accounts (usually). In essence, the ex-spouse becomes a co-beneficiary of the retirement plan and he/she will be responsible for the related taxes on the withdrawals, or the payments can be deposited into the spouse’s retirement account, free from penalties or taxes until they withdraw the money. There are other types of retirement plans that are used by specific kinds of corporations or employers–403b plans for nonprofits, TSERS plans for some government agencies, and pensions. These different plans require court orders similar to QDROs to be entered before they can be divided.
Without a QDRO, money distributed from a qualified retirement plan may be taxable and depending on age, hit with a 10% early withdrawal fee as well.
If no retirement benefits were earned during the marriage, or if separate retirement accounts are maintained and both people agree to waive in writing any claims to the other’s retirement, then a QDRO will not be needed.