First of all: DON’T combine QDRO’s. It seems like such an innocuous, money saving measure. Go along to get along. You’re no longer married and it seems like we should be done with these things. Who knew we have to cooperate to get your QDRO completed.

I met with client today whose now ex-husband gave her an Excel spreadsheet in which he had done the calculations for for her for their QDRO and then he sent this spreadsheet on to the QDRO attorney. My client was now thinking that this was “what it had to be” because the attorney must know what they’re doing. Nope. They’re taking instructions from the two of you.

We have all purchased a house: You negotiate the purchase price and the terms of the sale between you the buyer, and the seller. After all that negotiating is done, you bring your purchase contract to the escrow company, the closing agent or the title company. The title company takes instructions from each of you (buyer and seller) but is a neutral third-party whose fee is paid by each of you. This is exactly what a QDRO attorney is. If you look in your MSA agreement you will notice that you are each instructed to pay 50% of QDRO attorney’s preparation fees. That’s because this is like closing on an escrow.

The QDRO attorney is a neutral. Up until this time, a divorcing person works with an attorney as their advocate and their ally.  The QDRO attorney is not that. A QDRO attorney is paid for, and works for, both of you.  They are taking the instructions that the two of you provide. 

In this particular case the husband has a sizable 401(k) with his employer. The divorce was finalized December 31, 2018. The market just happened to have had its worst December correction in history, but has since recovered. So the husband, who just happens to work in the financial services industry, calculated the value of his 401(k) as of Dec 31^st 2018.  An approximately 15% down correction, or decrease in value. Happy to share the loss with his ex-wife, but not willing to explain that the $100k+ loss had more than recovered. Additionally that will happen on that community property portion of the marital portion of that 401(k). That small detail was left out

In order to try to save the additional $350 each ($700 total) for the second QDRO to divide the wife’s smaller 457 plan, the ex-husband suggested that they do an “equalizing payment.” Trouble is, he wanted to use his lower valuation and offset the actual dollar, well 50% of that dollar, against her smaller 457.

Here’s how QDRO’s work:  this is a court order prepared by the QDRO attorney using approved language from the employer’s 401(k) administrator. In this case my client was entitled per court order MSA to the community property interest of the marital portion of the 401(k).  That means that 50% of the value in her case decided based on the date of separation, plus any gains or losses is attributable to her.

The same factors would apply to the smaller 457 plan valuations and calculations are done by the TPA or the third party administrator of the retirement plan they are not done by ex-spouses additionally any gains or losses are not distributed until the final day of transfer. Often 5 to 6 months from the time you start processing a QDRO all the more reason to have your QDRO prepared in advance so that it is signed by the X husband at the time the MSA is signed. 

Here is how a QDRO attorney described the cumbersome process to a client for me recently:

The procedure/timing is as follows: 

1. I prepare a QDRO (once an agreement is made on the amount to be placed in the QDRO). 
2. I will send the proposed QDRO to (the husband’s employer) with copies to the parties. 
3. (Husband’s employer) normally takes up to 60 days to pre-approve a QDRO (in my last couple of cases, they only took about 30-40 days). 
4. Once we have pre-approval from (husband’s employer), I will circulate the final QDRO for signing. 
5. When both parties have signed, I will send the QDRO to Court for filing.
6. Your case is in North County, and North County is taking between 2 months and 4 months to file any Orders (a QDRO is an Order).   
7. Upon receipt from the Court, I will send the filed, certified QDRO to (husband’s employer).
8. Upon receipt by (husband’s employer), they will send a letter advising they received the QDRO, and there is a 30 day appeal period and following the appeal period they will make a determination that the filed Order is acceptable within a “reasonable time”, which they state is ordinarily 90 days  (in my last couple of cases, they only took 30-40 days), following the 30 day appeal period.  
9. Once all approved, they will transfer the funds.
10. Funds transferred are calculated based on the instructions from the MSA & QDRO – on the date they are finally transferred.

This is not a quick, nor easy process. However it is very much worth the effort. Just know you’re in for plan on it and don’t let someone trying “to” get you your money early” take what is rightfully your legal portion of your family assets as described in your divorce decree for MSA.

**When all is said and done I will detail the dollar amount the difference in what this client actually received versus what her now ex-husband was offering her testing how individual statements go missing and only the ones that support a particular conclusion are the ones that show up. It will be another six months or so, but mark my words…

Hang in there. We’ll all make it out the other side.