What risks are involved with DIY QDROs

Qualified Domestic Relations Order Pitfalls

QDROs can be very complex and technical orders that require retirement plan and drafting expertise distinct from family law practice. Following the tips below when drafting your Marital Settlement Agreement language can help you avoid many of the common pitfalls associated with drafting QDROS and will protect you and your client by avoiding possible misinterpretation of the award in the future.

Legal Plan Name

It is important to include language in the parties’ Marital Settlement Agreement that clearly identifies each individual account to be divided by QDRO by its legal plan name and not by its third-party administrator. Each plan has a unique identifying legal plan name. Third Party Administrators can change throughout the life of the plan.

Award Language

Defined contribution plans and defined benefit plans are vastly different retirement plans and have different implications when trying to divide them. Knowing the plan type and the benefit to be divided can substantially affect how you may choose to negotiate a settlement. Using award language appropriate for the type of plan being divided in your Marital Settlement Agreement will ensure the parties QDROs will be drafted appropriately and in accordance with your settlement intentions.

Gains and Losses

Generally, gains and losses can only be awarded in a QDRO dividing a defined contribution plan. Always including specific gains and loss language in your Marital Settlement Agreement language to divide a defined contribution plan is a good practice and will clarify the actual award intention.


When determining the amount to be divided by QDRO, it is important to consider the impact of any outstanding loan balance in the Participant’s account. An outstanding loan may be considered to be an asset in the Participant’s account, but the obligation to repay the loan stays with the Participant and cannot be transferred to the Alternate Payee. Your Marital Settlement Agreement language should clearly indicate whether the value of the Participant’s outstanding loan will be included or excluded in the Participant’s account balance to be divided.

Qualified Domestic Relations Order Liability

Family law attorneys create QDRO liability in two basic ways. The first comes from drafting or agreeing to a Marital Settlement Agreement that fails to protect the property interests of his or her client. The second comes from drafting a QDRO that fails to secure the property rights agreed to in the MSA.

Divorce Financial Solutions is one of the very few companies in the nation that has professional liability insurance to cover the drafting of QDROs. Reach out to us today to learn more about how our military, FERS and ERISA law drafting expertise can minimize your liability and maximize the effectiveness of the QDRO.

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