What Happens If the Money Is Gone?

Divorces can be very difficult and complicated. Imagine getting your divorce and then spending time with a QDRO drafter, only to discover that the retirement funds aren’t there anymore! What if the account has been depleted, rolled over, or mismanaged before the QDRO is actually processed?

Let’s unpack what’s happening here— and what options you may have.

A Qualified Domestic Relations Order (or QDRO) is a legal order that recognizes the right of an alternate payee (usually a former spouse) to receive all or a portion of the benefits payable under a retirement plan. They are usually drafted after the divorce (but not always) and then served on the plan. The Plan will respond with letters explaining how the alternate payee can receive his or her funds. But sometimes that letter contains the bad news that there are not sufficient funds in the account to honor the QDRO. What could have happened?

First, it is possible that the plan participant withdrew the funds early, leaving nothing or not enough behind to satisfy the terms of the QDRO. If the plan participant (your ex-spouse) withdrew funds from the retirement account before the QDRO is submitted and approved, the funds may no longer be available. There may be no way to enforce it directly through the plan administrator.

Second, it’s possible that the funds may have been moved to a different plan or an IRA. The good news is that, at least, the money still exists and hasn’t been spent. However, this is a more complicated legal question and may involve bringing an action in Court or drafting a new QDRO. An experienced QDRO attorney can assist you with determining the best course of action.

Finally, sometimes retirement plans are terminated. The employer, for example, may need to close out the Plan and no longer offer retirement benefits to their employees. Again, this is a time to consider involving a QDRO attorney.

If you’re in a situation where the retirement funds are gone, it doesn’t necessarily mean you’re out of luck — but it does get much more complicated.

The most important lesson? Don’t wait. Submit your QDRO as soon as possible after the divorce. Delays increase the risk that the money won’t be there when the QDRO is processed. These documents are technical and easy to get wrong. A qualified QDRO attorney or specialist can help draft and submit the order correctly and quickly.

Here at Weinberg & Schwartz, we are available to assist and encourage you to consider reaching out.