Common QDRO Mistakes

During my tenure with the retirement system in New York state, I saw firsthand the types of errors and omissions attorneys make when negotiating pension terms. Here are the 10 most common:

  1. Failure to put key terms into the separation agreement. Simply stating vaguely that "the pension will be subject to division using the Majauskas formula and a QDRO will be prepared" is an invitation to future litigation. If you fail to deal with these issues early on, your client may not be entitled to key benefits later.
  2. Delegation of the DRO/QDRO drafting to the alternate payee's attorney or failure to delegate drafting to either party. Many participants are not adequately counseled with information regarding the terms of the order, only to find out at the time of retirement that the order contains highly unfavorable terms.
  3. Failure to adequately address pre and post-retirement survivorship issues in the separation agreement or QDRO/DRO. It is fairly common for attorneys to incorporate language providing for survivorship rights in the separation agreement, but due to oversight, omit such language in the actual order. Many attorneys are unaware of the different, customized options.
  4. Failure to adequately explain the terms of the QDRO/DRO to your client at the time of its negotiation or entry. A QDRO/DRO is not a neutral document and may be drafted in numerous ways to preserve future earnings due to post-divorce promotions or salary increases, overtime compensation and future disability of the plan participant
  5. Failure to perform and/or adequately review pension discovery information. Without adequate discovery, you may be agreeing to terms that the plan cannot provide to your client or you may be drafting orders which will never be accepted by the plan, causing you delay and embarrassment and your client additional expense.
  6. Blind reliance on the plan's model QDRO/DRO forms. A frightening number of attorneys simply "fill in the blanks" of the plan's model forms, or delegate this task to a secretary or paralegal without adequately considering whether other more advantageous distributions are possible. As a former DRO administrator, I can draft a QDRO/DRO that contains enhanced protection for your client, yet will be found acceptable to the plan.
  7. Failure to adequately analyze a present value calculation. Many lawyers fail to properly analyze the basis for the actuary's calculation.
  8. Defined Contribution Plans: Failure to provide for spouse's earnings on the segregated balance from the valuation date to the date of distribution. It is extremely important to specify whether the alternate payee will be allocated any interest, dividends, investment gains or losses, between the valuation date (usually the date of commencement of the divorce action) and the actual date of distribution.

  9. Failure to understand and counsel your client on the tax implications of a plan distribution. The nonemployee should be careful to set aside any money from a QDRO plan distribution needed for such projected expenses before rolling the remainder into an IRA.
  10. Failure to timely file the order, or even worse, failure to file the order at all. This is by far one of the most egregious mistakes an attorney can make in the process. Many attorneys will submit a proposed order for plan review and never submit a final order.

For More Information Avoiding QDRO Mistakes, Contact The Firm

If you have questions about QDRO, retirement accounts and divorce, contact The Law Office of Carolyn D'Agostino, PLLC, in Clifton Park, New York: 518-982-5229 or send the firm an email.