The QDRO Process and Timeline
The QDRO Process: How Long Will It Take to Get My Money?
In order to understand why the QDRO process sometimes takes a bit of time, it is important to understand that it is not as simple as just withdrawing money from an account. Often when clients need a QDRO, they are exhausted from a long and arduous divorce process and it feels like the last thing you may want to do is hire another attorney to get the final order completed. If money is withdrawn out of the account without a QDRO, it will usually require payment of taxes right away and a penalty. Likely, it will also lose its beneficial/retirement status.
When you proceed with the QDRO, what is a reasonable/expected timeline? If everything goes right and is expedited as much as possible, you may have to wait a few months for a defined benefit account (such as a 401(k) or IRA account to be divided properly. As to a pension/defined contribution plan, you may have to wait many years (i.e. typically until the participant spouse reties or reaches retirement age), but for some accounts, the entry of a QDRO (or other qualified division order) is the only mechanism to actually divide and preserve the other spouse’s entitlement to retirement assets.
For a more detailed account of the anticipated timeline, let’s go through the steps!
Drafting the QDRO: Two Weeks
Once our office receives all of the information needed (all forms, the engagement letter/contract, the required fee/funds and the completed documents), typically the drafting can be completed in a couple of weeks. Often this step/process is delayed because one or more necessary components of information is needed. For our office, sometimes the plan administrator is delayed in providing full information, in other situations, a client does not provide full information such as needed social security numbers, addresses, dates of birth, etc. and in still other scenarios, something such as a page to a divorce decree is missing and the vital information from that page is required to prepare the draft document. When this happens, the QDRO attorney preparing your order isn’t to blame- this process cannot be completed until all information is available.
Assuming your QDRO attorney has everything they need, and the divorce decree and settlement documents were prepared in a clear manner to articulate everything regarding the division of the account/entry of the needed order, typically this can be drafted and prepared within a couple of weeks.
In some situations, particularly for unique plans, such as church, NFL plans, some union plans, government plans and other similar retirement or pension plans, our office is required to reach out to the plan administrator to obtain the necessary information to draft the document in the way the plan will actually accept and approve it.
Party and Plan Pre-Approval: Typically About a Month:
Once a rough draft is prepared and our client approves it, it next needs to be approved by the opposing party and the family law attorneys (if they are still involved in the process). Once this process has been completed, the draft document needs to be sent to the plan administrator for “pre-approval.” This generally means that the plan administrator review the language of the order we prepare and confirms that they can carry out the terms of the order. They do not review it for fairness, or sometimes even accuracy, but rather to ensure that all terms are permissible under the plan. This step is generally worthwhile when the plan permits it because it avoids the frustrating situation of waiting for the QDRO to be processed only to learn weeks or months later that the Plan cannot process or administer the document as it is written. This generally ensures that time isn’t wasted and that the Plan interprets the document in accordance with the settlement agreement and/or divorce decree. It is very common for the plan administrator to send a letter either requesting/recommending or even requiring that changes be made before the final draft is entered. The process of review by the Plan Administrator is intended to be a collaborative process where the final draft is completed.
Final Review by the Parties and Signatures: A Month
Once a QDRO is pre-approved and the draft is ready, both former spouses (and their attorneys if still involved) will need to do a final review, ask any questions, understand the language to their satisfaction and then approve the document. Obviously, this does not necessarily mean that the spouse who owns the retirement account is happy or wants to divide a share of the retirement account, but that he or she agrees that the order is accurately prepared according to the directives of the court and/or the settlement agreement. The document needs to be consistent with what was agreed upon and ordered, something fair and in accordance with the divorce.
Filing with the Court and the Court’s Signature:
This is an area that we have little to no control over, nor the ability to “push” faster typically. We can expeditiously e-file the order with the court once it is approved by all parties, but depending on the court/judge involved, it may get entered very quickly or it may take many, many weeks. If one party refuses to approve and sign the order, however, it will likely take a lot longer or even require a scheduled hearing.
Transmit Certified Copies to the Plan: A Month
Once the judge has signed the document, the court clerk has to enter it in your official divorce or family court case record. Once that has been accomplished, our office will need to obtain certified copies and send that official/certified copy to the plan administrator.
Fill Out and Complete Distribution Paperwork from the Plan: While Waiting on the Court
Most deferred compensation plans (such as cash and investment accounts) will have special paperwork that needs to be completed by the non-employee spouse that allows them to direct, to the plan, what they want done with their share of the money. Typically, the form will give options such as “roll over to another retirement account”, “open a new account at the current/same financial institution” or “cash out the funds and send a check.” Some plans also require the employee’s spouse to fill out a similar form. If the plan administrator is asking for a step to be completed, it will be faster and most efficient to simply complete the steps requested.
Get Paid the Funds: Typically 30 to 90 days (But this Can Vary Widely)
For deferred compensation accounts (such as cash accounts and investment accounts like a 401(k), 457 plan, etc.) this is the point when the plan funds can get cashed out. Once the QDRO is processed, the party receiving the funds will owe the income taxes if the funds are cashed and if applicable, penalties and other administrative fees need to be paid. A QDRO does allow for waiver of the early withdrawal penalty in certain circumstances.
If you are being awarded a pension plan, likely, nothing can be paid out at this point. Typically, nothing can be paid until your spouse has reached retirement age or service time eligibility. Under some plans, even if a spouse is of retirement age, they still cannot receive funds until the employee spouse is eligible to receive his or her funds. If you are hopeful to receive a lump sum from a pension plan, it is important to share this with your attorney early so it can be negotiated- either as an offset to other asset division, or to find out if it is an available option under the relevant plan at issue.
Regardless of the type of plan, the plan administrator will typically send a letter (again in 30 to 90 days, or sometimes longer) indicating that the order for the plan is “qualified.” The plan administrator will typically provide some information about how it interpreted the order and give an opportunity for both sides to appeal if they disagree with an interpretation. Many plans will allow you to waive this appeal time period if both parties sign a waiver.
At the conclusion of the appeal period, the plan will usually set aside the nonemployee spouse’s money into a separate/temporary account and then either write a check, roll over the funds or explain how the funds are otherwise segregated.
In conclusion, how long does it take to get QDRO funds/money?
It depends on the plan involved, the cooperation of the parties and some things beyond our control such as the cooperation of the parties, the review time frame by the plan administrator, the time the court takes to enter the order, among many other factors that are beyond our control. There are many steps to getting a QDRO prepared, entered and processed by the Plan administrator correctly. The best we can do when it comes to timing is to give you our best estimate and work with you and the parties involved to keep the ball moving forward until the funds are rolled over, segregated and/or cashed out at your request.
"I have known Attorney Pingel for more than fifteen (15) years. Mandee is a lawyer I consider a respected colleague. She has a reputation for being intelligent, knowledgeable about the law, well-prepared and kind."- A Lawyer in Liberty, Missouri