How long does it take for a QDRO to be completed?
Divorcing couples are often faced with having a QDRO drafted. One of the first questions they ask is “How long will this take?”
For many, it seems that a QDRO should be similar to a transaction at a bank, like moving money from one account to another account. It would seem that it would take a few days or maybe a few weeks at the longest.
In fact, unlike bank accounts, qualified retirement plans (the “q” in qualified is the “Q” in QDRO) are specifically designed to protect the account balance and benefits from most transactions, and moving money from one account to another is very difficult without a paying penalties or a QDRO.
The process of drafting a QDRO is not like a transaction at a bank. What follows is a brief summary of the process with some rough estimates of how long the process might take under ideal circumstances and under less-than-ideal circumstances.
The first step is to retain a QDRO drafter. Retaining a QDRO draft is a straightforward process of making an inquiry and signing a retainer agreement. Drafters will request certain documents from their clients, including a Judgment of Divorce, a Marital Settlement Agreement, a recent statement from the plan, plan summaries or statements of benefits, and model QDRO language (which some plans provide.)
- Under ideal circumstances, the client will have these documents available, and drafting can commence within a few days.
- Under less-than-ideal circumstances, however, the client may not know the name of the plan, for example. If the Marital Settlement Agreement says “Wife’s 401k” and the client has no other information, the drafter cannot begin drafting. This will cause a delay. That delay will last as long as it takes to obtain a recent statement with the name of the plan.
The second step is for the QDRO drafter to actually draft the QDRO. QDROs are technical documents which require considerable experience and skill. In part, the QDRO draft looks to the Judgment of Divorce and Marital Settlement Agreement for their instructions but may also rely on instructions provided directly by the client.
- Under ideal circumstances, the QDRO can be drafted from the contents of the Judgment of Divorce, Marital Settlement Agreement, and provided instructions. In such cases, the QDRO draft should have a draft available in a week or two.
- Under less-than-ideal circumstances, the QDRO may need further instructions. For example, the Marital Settlement Agreement says that one party gets $10,000 but does not indicate whether that party receives investment experience. In that case, the QDRO draft will ask for further instructions.
The third step is to share a draft of the QDRO with (1) the other party and (2) the Plan. Because, ultimately, the goal is to submit to the Court a draft which has been approved by both parties and the Plan, it’s important to share the draft early. The other party may want to have the draft by a professional, and the Plan likely has an extensive, in-house review process.
- Under ideal circumstances, both the other party and the Plan will respond within a few days and request no edits.
- Under less-than-ideal circumstances, the other party will retain counsel to review the draft. This may take more than a month. That attorney may request edits, which may mean that the parties will have to negotiate terms. Like any negotiation, there’s no telling how long this will take. Secondly, the plan itself will need to review the draft. Some plans respond very quickly, but most take a month or two. Some plans, however, will take six months! If there are request edits and a second draft needs to be submitted, it could take more than a year to get a plan’s approval!
Finally, the last step is to submit the Order the Court. Once the client, the other party, and the Plan have all agreed on the same draft, the parties sign the QDRO, and it is filed with the Court. After a few days, the Court should issue a certified copy of the QDRO. This, then, is served on the Plan.
So, how long does it take for a QDRO to be completed? As any lawyer would say: it depends. Under ideal circumstances, it could take a few months. Under less-than-ideal circumstances, it could take much longer.
