Be careful if you are using the model form when you are drafting a Qualified Domestic Relations Order to divide retirement assets pursuant to a divorce. The model orders are prepared to protect the plan itself, not the employee and certainly not the employee’s soon to be former spouse.
You need to makes sure you have defined the amount that is being transferred to a former spouse and you need to make sure you have stated a precise date for the plan administrator to calculate the asset valuation. The asset valuation date is often times the divorce date but there are plans that have valuation date periods which means that several dates fall into one specific valuation period. You cannot simply state that the retirement account is to be divided equally. This does not allow the actuaries of the plan to insert the date of the divorce. If the QDRO states that the retirement account is to be divided equally, the entire account will be divided upon retirement which may mean that earnings after the divorce are included in the division which may not have been your intent.
When you draft and submit a QDRO to the plan, it may take several weeks or months to be qualified or approved. The document that you submit needs to address what happens to the gains or losses that occur during the qualification process. The retirement account will likely fluctuate, and once you have provided a valuation date, you need to make a provision for the income that is lost and/or earned during the process after the qualification date.
You do not want to overlook a provision that details what happens if the employee dies prior to the time he retires and can begin drawing a pension. Additionally you need to provide for the contingency of the former spouse dying prior to receiving a portion of the pension. It is wise to read the plan document that details how the benefits are treated in the event of either parties’ death. The form provided may not address this, however, it is important that it is added to the QDRO.
There are times when a retirement plan has an outstanding loan. The QDRO needs to let the plan administrator know how to deal with these loans when they are dividing up the benefits. The language you will use will depend upon what is best for your client but it should be addressed and not forgotten.