Filing for a separation or divorce can be a tricky situation, not to mention stressful. There are a lot of factors that are important to know. We’re here to help you with any questions regarding getting funds from your qualified domestic relations order or QDRO.
Table of Contents
How Long Does a QDRO Take?
Receiving funds from a QDRO can take between two to five weeks after everything has been processed and approved. There are situations where it may take longer, but those are rare.
How Long Does It Take to Process a QDRO?
Typically, filing a QDRO is a decently lengthy process. Once filed, it can take anywhere from 60-90 days to complete the whole process, given everything goes as planned and there are no unexpected hiccups. Once both you and the other party sign the QDRO, it is sent to the court to go into the case file. After the QDRO has been approved by the court, it is then sent to a plan administrator to begin the qualification process.
Though, you should keep in mind that the plan administrator gets an 18-month time frame to come up with the qualification status of the QDRO, so you could be waiting up to a year and a half to figure out if it’s qualified or not. It’s not very common that the qualification process takes 18 months, but expect it to take some time if you have a more complex QDRO.
If the plan administrator chooses to reject your QDRO, you will have to start back over in the draft stage and go through the whole waiting process again.
Drafting a QDRO
- Get documents together, review, and prepare QDRO
- Draft your order
- File your order for review and approval
- Court will review and execute the proposed order
- The plan administrator will receive a certified copy of the complete order to determine your qualified status
- You will be offered tax planning advice with associate QDRO drafting fees and assistance with the distribution of the QDRO amount or benefit
The Necessary Approvals of a QDRO
Given that getting approved depends on several people, (the couple, their lawyer, the judge, and the plan administrator) gaining approval can be tricky. If any of these people aren’t approved, or their approvals are missing, the plan is ruled void. Someone may submit the plan to the plan administrator for pre-approval and then go back to the judge for its final approval process. This whole process can take months, even years.
Plan Administrator’s Response
Often, obtaining the Plan Administrator’s response can be a lengthy process, considering the Plan Administrator has up to 18 months before they are required to respond. Getting around this can be more simple than you’d expect. A full approval can take quite some time, but getting your QDRO pre-approved doesn’t take nearly as long, and you save yourself the hassle of having to re-file your QDRO.
After your QDRO has been drafted and is ready to be sent to a judge, have it sent in to be pre-approved instead. This way, you find all the mistakes and qualifications and don’t have to worry about having it rejected and starting the whole process over again from the beginning.
It helps if you can get an idea of how the approval is going. You can alter your QDRO in the necessary ways to ensure approval and only have to go through the official approval process once.
Metropolitan Areas Have Slow Courts
When it comes down to it, you’re going to spend a lot of time just waiting for signatures on the court’s end if you live in a higher-populated area. Most courthouses are understaffed, which then leaves piles of work for all the court’s employees that tend to add up quickly.
There have been cases where a QDRO may sit in the courthouse without a signature for months. Sometimes people lose their files in the mail or misplace them in the courthouse. If you are lucky, your courthouse allows for e-filing. Prepare for the process to be longer if you’re not living in a rural area.
Why You Should Speed Up Getting Your QDRO
As of right now, there isn’t a time limit on when you can file a QDRO following a divorce. That being said, it’s better to file immediately after rather than wait. It all depends on the cooperation of the other party. That’s why you should request your QDRO as soon as possible.
Waiting can cause difficulties when it comes to filing a QDRO. Many factors may complicate the process, such as the other party retiring, dying, borrowing against the plan, moving, or transferring funds. Another big problem is that it takes time for a judge to sign anything. You may be waiting for quite a while to begin with. Waiting isn’t suggested. It’s best to file the QDRO immediately.
How Long Does It Take to Receive Funds From a QDRO?
You can instantly receive QDRO funds in certain cases, but you need to ensure you follow appropriate tax guidelines.
Taxes
Typically, under a QDRO, the parties are taxed on the benefits paid to them as long as both parties are either spouses or ex-spouses. The plan reports tax and income information to the IRS. If you take the amount earlier than retirement age, it will be treated as standard income, you must pay taxes accordingly.
QDRO and the IRS
Under a QDRO, the parties must follow all IRS rules, regardless of what your case and QDRO state. The beneficiary must comply with the Irs’s retirement regulations.
Conclusion
Receiving funds from a QDRO may take quite a while, up to a year or more. The drafting process may take you a while, whereas the qualification process may take between two months and a year and a half.
After all of this is completed, it may take up to five weeks before you receive any payments. You may have the ability to opt for a lump sum payment or monthly installments. Though, it will all be taxed unless it falls under a Thrift Savings plan, an IRA, or an ESOP
