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Considering the current economic environment, it's time to cast an eye on your retirement plan. How do you handle the asset split when you're in the middle of a divorce? What are the considerations?

When you need to transfer an interest in a qualified retirement plan, you will use a qualified domestic relations order, or QDRO.

A QDRO permits you or your ex to withdraw shares and roll the money over to an IRA (to the extent current withdrawals are permitted by the terms of the qualified retirement plan).The IRA rollover procedure allows the person entitled to money from the retirement plan to take over management of the money while continuing to postpone taxes until funds are withdrawn from the IRA.

It's crucial that you obtain a QDRO before splitting your qualified retirement account with your ex. Otherwise, it's treated as a taxable distribution to you. This means you owe the IRS for money that actually winds up in your ex's pocket. For your ex, it's a tax-free windfall at your expense. On top of the income tax bill, you may also get hit with the 10 percent premature withdrawal penalty if you are under age 59 1/2.

With such severe tax consequences, you should consult with a tax professional who has QDRO experience to make sure all the paperwork is done correctly. This must happen before the divorce papers are finalized. Don't assume your divorce attorney knows how to take care of a qualified domestic relations order.

If you're using a QDRO, here are some basic terms to know:

  • The person whose interest is being transferred is called the "participant" (because he or she is a participant in the retirement plan), while the person to whom the interest is transferred to is called the "alternate payee."
  • The person entitled to money from a qualified retirement plan will also be responsible for paying the related income taxes when that money is received in the form of a pension, annuity or withdrawals. In effect, that person becomes a co-beneficiary of the existing qualified plan pension account.

A QDRO must meet certain requirements to be valid. These are the most important:

  • QDROs are subject to ERISA (Employee Retirement Income Security Act) requirements.
  • The QDRO must comply with certain guidelines set up by the pension plan administrator.
  • A state authority, usually a court, must issue a judgment, order or decree addressing the marital property settlement before there's a valid QDRP. In other words, even if you and your ex to agree to divide a retirement account, there's no QDRO until a judge approves the arrangement. At a minimum, the divorce decree will need to include:

1. Name and mailing address of the "plan participant" (you) and the "alternate payee" (your ex).

2. Each retirement qualified, plan account to be split up under your divorce.

3. The dollar amount or percentage of benefits to be paid from each account to the alternate payee.

4. The number of payments or benefits period covered by the QDRO.

5. A statement that a QDRO is being established under your state's domestic relations laws and Section 414(p) of the Internal Revenue Code.

Focus on these points and you will have much more clarity about your retirement situation going forward.

Cathy Meyer is the head of's Divorce Support channel


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  • Comment Link Annette Smith Thursday, 20 November 2014 04:34 posted by Annette Smith

    My ex did not include the 401K in the financial disclosure. We divorced 19 yrs ago and I found out about the 401K when I filed for Social Security. Do I have any recourse? We divorced in Texas.

  • Comment Link Guest Saturday, 02 February 2013 21:24 posted by Guest

    x - husband needs income tax form fatherd : X - husband who fatherd a baby asked the income tax we filled together 2yrs. Ago what could be he purpose? He claims needs it to bring his new born from his country. Is that necessary?

  • Comment Link alexmc Wednesday, 12 September 2012 16:04 posted by alexmc

    Living abroad, divorcing abroad, relocating to Canada: Hello, One of the ways my future ex abused me was by refusing to open a joint bank account and withholding all financial information. I was given grocery money from time to time but didn't even know my spouse's salary. Obviously I brought the matter up - many times - but any discussion of working out a budget was met with anger and verbal abuse. Two years after I filed for divorce, my ex is still messing about with financial issues. I know very well he has off-shore accounts - he's a CPA, so of course he's well-protected - but he pleads poverty. My two young children have gone ahead to Canada with my mother but I'm stuck here in Switzerland, waiting to go before the judge again because of my ex's capricious whims. Once I'm permitted to join my children in Canada, I know I'll receive half of my ex's pension. I don't have the faintest idea how to invest it or what portion of that money I should invest. All I know is that it shouldn't sit in the bank. I imagine I'll be taxed on this money, which seems grossly unfair but in the past two years, I've learned that truly nothing is fair and all the hard work I put into our marriage and the raising of our children, while sacrificing my career, has gone unacknowledged.

    Complaining aside, does anyone have successful experience and strategies in investing a lump sum? Thanks in advance!

  • Comment Link Guest Saturday, 08 September 2012 21:15 posted by Guest

    my wifes retirement plan: Its hard for me to tell this in a short manner, I always want to elaberate too much. Hear goes anyway, I am 69 years old my wife just turned 49, we have been together + - 20 years. We did a common law in Harris County Tx. It has been lots of ups and downs, because she just didn't seem to understand that you stop seeing other men when you are married. Thats all I will say on that now. This A.M. she seemed to have taken a bad dose of medicine, we were in the kitchen making breakfast everything fine,all of a sudden she went off for no reason like I had hit her in the face, right away I knew here we go again, I know for a fact she has been seeing a certain guy for a while. And he must be putting preasure on her to leave me. There is my son and a grandbaby involved, and this goes into another story altogether, he is 22 and lives with us and he is split with his wife and has vestation with the baby each weekend are alternate weekends? My wife and him both no how much i love the baby, she is preciuous. Back to the diviource thing,I am a retired are simi retired business man, and now just draw social security, she finally after working in topless bars in her younger years until she met me, and she started dating my sports car and nice home. She went to school on my money long before we were married, trained to be a pheibotomist (you may notice i'm not doing good on spelling, I've always had someone to do typing for me) she made thru school,went to work in a doctors office got caught screwing the doctors, got fired from that. I then spent 37,000 dollars on putting her through business school,she was seeing some guy there, they had a fight so she dropped out of that school. What i'm trying to get to she now has a 401 retirement plan that has approximately 70,000 plus in it. Am I entitled to split this??

  • Comment Link Guest Tuesday, 24 January 2012 13:47 posted by Guest

    Retirement: My exusband is to receive a portion of my retirement. He has recently remarried and I dont feel he is entitled to this. The only thing I got in the settlement was my personal belongings and some furniture. He got the house and alot of possessions. Can I renegotiate this after 5 yrs of being divorced? I am not ready to retire but will be within the next 7 yrs. Please help!

  • Comment Link Guest Tuesday, 10 January 2012 15:36 posted by Guest

    QDRO: It's been 3 years since my divorce. I have hired a second attorny to do my QDRO. We (my ex and I) went through mediation and our divorce was final 3 years ago. He would not sign the first one so after some time I hired a second attorney. I realized that I had to get it done and the first one might not have been done properly. This one specializes in QDRO's. My ex is already threatening. He has used my kids against me. He doesn't want to have to pay me a percentage which would include increases nor does he want to pay me until I die. But this is how it is set up. We were married 29 years. I could have asked for 50% I asked for 30%. I Only got a few items of things from the home when I left. He now hates me for leaving and has done a pretty good job of making the kids hate me too. I'm not sure if this is a form of Parental Alienation or not since my kids are grown, I believe it is. My ex is the master minipulator. It has taken me almost 2 years to get my younger son to talk to me. Now that this QDRO is going through he is back to not calling. My older son called me to ask me why I am doing this to dad. My step daughter hasn't let me speak to the grandkids since last Christmas. She was 6 when we married. I practically rasied her. My ex is very controlling and now has complete control over everyone........except me. I left. Finally.

  • Comment Link TallyGwen Tuesday, 01 September 2009 10:54 posted by TallyGwen

    Divorce and retirement division: Great article with solid information!