December 20, 2023

What is a QDRO, and Why Does The Process Take So Long?

When people split up, they want to share their retirement monies fairly, which generally involves lots of rules and laws. Each retirement plan has its own special rules that a QDRO attorney must consider when writing the QDRO, so they are very tricky.

According to Investopedia, a qualified domestic relations order (QDRO) is a legal document (typically found in a divorce agreement) that recognizes that a spouse, former spouse, child, or other dependent is entitled to receive a predefined portion of the account owner’s retirement plan assets.

qualified domestic relations order

8 Reasons the QDRO Process Takes So Long:

  1. Legal Complexity – Involves intricate legal and financial matters to divide retirement accounts during divorce or separation. Must comply with federal and state laws*, as well as plan-pecific rules (each plan has different rules), and the process demands careful scrutiny.
  2. Review Process – Before it can be signed, a QDRO must be reviewed by the retirement plan administrator and the court. Each party checks for accuracy, completeness, and compliance with plan requirements. This part can be very time consuming.
  3. Documentation – The creation of a QDRO requires precise documentation. This includes the identification of retirement accounts to be divided, the terms, and the parties involved.
  4. Negotiations – Parties involved – including the divorcing spouses and attorneys – may need to negotiate the terms of the QDRO, which can cause delays.
  5. Court Backlog – Courts often have large caseloads, and processing QDROs are just one aspect of their responsibilities.
  6. Plan Administrator Procedures – A plan administrator may have specific internal procedures for reviewing and processing, which can vary from institution to institution.
  7. Errors and Revisions – Mistakes and oversights can create additional review cycles.
  8. Communication Delays – A QDRO requires communication between multiple parties, including attorneys, spouses, plan administrators, and the courts.

In summary, a QDRO takes a long time to process due to legal complexity, the fact that multiple parties are involved, the need for meticulous documentation, the negotiation process, and the need for compliance with various rules and regulations. Delays can occur at any stage, which makes processing a QDRO a very time-consuming endeavor.

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* – Investment advisory services offered through Crossover Capital Brands, LLC (dba Crossover Capital), a Registered Investment Advisor with the U.S. Securities and Exchange Commission. This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. This information is not an offer or a solicitation to buy or sell securities. The information contained may have been compiled from third party sources and is believed to be reliable.

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