The Cost of Qualified Domestic Relations Orders

A recent article in the Wall Street Journal (Nov. 9, 2004, Jennifer Saranow) highlights a little noticed May, 2003 change to the federal Employee Retirement Security Act (ERISA) regarding a charges for the review of a Qualified Domestic Relations Order (QDRO)in a divorce.

A QDRO is the order which divides a parties pension, retirement benefits or 401K accounts at the time of a divorce. The order is customarily prepared by one of the parties attorneys or a pension consultant and submitted to the Plan Administrator for review, approval and implementation.

Prior to May, 2003, the federal regulations precluded plan administrators from charging individual accounts for the review, approval and implementation of QDRO’s.

As of May, 2003 the federal regulations were changed to permit administrators or employers to charge the employee for this service.

The article reports that it has taken a year or so for the change to be implemented, but that plans and employers are now regularly deducting the costs related to the QDRO from the plan.

Attorneys for divorce litigants should be aware of this change and bargain for the allocation of these costs just as they do the allocation of the costs of preparing the QDRO. Otherwise, the plan owner may have the full cost assessed against them.