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QDRO: What you need to know about retirement and divorce

On Behalf of | Feb 10, 2021 | Divorce |

Retirement stands for security after a lifetime of work. However, in divorce, many financial “sure things” turn out not to be that way, and that may include your retirement account.

One term you want to understand when it comes to retirement accounts in divorce is “QDRO.” It stands for Qualified Domestic Relations Order, and it is a special court order issued by Illinois judges to divide a retirement account for the purpose of divorce.

Why does my retirement account need to be divided anyway?

Retirement accounts are an asset. And Illinois includes all assets acquired during a marriage in asset division calculation. It doesn’t matter if it is a retirement account you had before your marriage or opened it after your wedding; if you contributed to it during your marriage, it is part of the conversation.

However, a QDRO is only applicable to employer-provided plans such as:

  • 401(k) plans
  • Pensions
  • Deferred-compensation plans
  • Profit-sharing plans

And most other types of employer-supplied benefit. This is because employer-supplied retirement plans are protected by the Employee Retirement Income Security Act (ERISA.)

ERISA is the federal law that sets minimum requirements for a retirement account. However, ERISA cedes much of the responsibility for managing this process to each state.

How much will this affect my retirement?

As with any asset division in Illinois, the court uses an “equitable distribution” standard. Equitable distribution means couples divide assets in a way that is fair to each person. Length marriage, size of the account, contributions before and after the marriage began and many other factors are part of the calculation.

It may be that your retirement account will go untouched. It may be that the court must significantly divide the account. That, in the end, will be up to a judge.

Do I have any control?

Division of retirement accounts is among the most complex areas of the property division process. The investment of time and emotional energy into retirement makes it an inherently sensitive area. But you can keep some control by contacting a skilled attorney.