What’s a QDRO?

A QDRO, or Qualified Domestic Relations Order, is a court order issued to your wife that grants her the right to receive all or part of your vested interest in a private retirement plan.

Your attorneys must determine the present value of your plan, and if you and your wife don't agree on the value, the judge will decide it for you based on expert testimony ($$$). So unless the difference is substantial, you’d be better off negotiating the difference.

If your wife isn’t counting on a deferred settlement for retirement income later on, her attorney will likely offer an immediate offset settlement, which would treat the value of each of your marital assets (including debt) as tradable commodities to use as bargaining chips. You’d each take one asset to offset one being retained by the other party. In this case, you might consider offering your wife a larger share of the marital home by offering her a credit of 100% of the value of the marital portion of your pension (vs. the usual 50% she’d normally get), which would increase her share of the home's equity, while you could retain all of your pension.

For example: Let’s say that you have $150K equity in your home; her half is $75K. And let’s say that the value of the marital portion of your pension is $50K; her half is $25K. But rather than give her $25K of your pension, you offer her a 100% credit of your pension’s value toward her share of the home’s equity, which increases her equity share to $125K ($75K + $50K = $125K). While this reduces your equity share by $25K, you'd make up the $25K by retaining the full value of your pension.

An alternative to an immediate offset settlement is a deferred settlement, which requires a QDRO for private retirement plans. You'll still need a Domestic Relations Order for a public plan (federal, state, local or military), but not a “Qualified” order.

Your wife will most likely receive a monthly income from your pension once you’re eligible to retire, but with a 401(k), ESOP, Profit Sharing Plan, etc., she'll be paid out immediately once the plan receives and approves the order.

However, in our case, the devil accepted an offer from the plan administrator to be paid out IMMEDIATELY from his PENSION.

And here’s the kicker: The plan administrator has assured my husband that paying the devil a one-time, lump-sum $6K payment will have NO effect whatsoever on the amount of his retirement!

So, hell yeah, we were excited about that!