Dividing 401-k Accounts
Couples who are avid about saving for retirement, or who have been married for a long period of time, often have significant assets in 401-K accounts. At the time of divorce, the deposits each spouse made into his/her 401-K during the marriage is community property subject to just and right division. Employer matching made during the marriage is also community property, provided that the employee is fully vested in the plan. Whether couples have agreed on how to divvy up these accounts or if the court makes a division, that is far from the end of the story.
401-K and pension plans are governed by the Employee Retirement Insurance and Security Act (ERISA), a federal law. 401-K and pension plans are administered by a plan administrator. No matter what the text of your divorce decree says, the plan administrator must pre-approve a qualified domestic relations order (QDRO) in order to divide the assets between spouses. Having a QDRO kicked back by the plan administrator potentially delays the division of assets and distributions. Therefore, attorneys often outsource the preparation of QDROs to consultants having special expertise in this area.
Though this is another person on the divorce “payroll,” outsourcing saves time and money because the consultants have experience with various administrators and know what items are likely to cause a QDRO to be rejected. Whatever the flat fee charge for QDRO preparation, it is almost always less expensive than having your attorney charge by the hour to draft a complex document.
