{4:00 minutes to read} People often want to know if there is any problem waiting to prepare the QDRO because they are not planning to retire for many years. And the answer is: it’s about the worst idea there is.
Last month, a woman came to me who had been divorced in 1998. Her divorce papers clearly stated she was entitled to a portion of her ex-husband’s pension but they had done nothing since 1998 to draft the pension order. He worked for a very large New York City utility company, and she heard he was about to retire, so she came to me at that point to get the QDRO done. Given the long delay, I knew that we needed to move quickly, so I drafted it and submitted it to the company. In less than a week they got back to me and said that he had no pension.
It turns out that this company’s pension has a cash buyout provision, and the husband had taken the cash buyout a couple of years earlier. As a result, there was nothing that a QDRO could possibly affect. The ex-wife’s option at this point is to sue him directly for her share of what she should have gotten a couple of years ago when he actually took the money from his retirement.
After the divorce, the participant in this and other similar plans can take all of their money out. There’s nothing to stop them from doing that, which is what this gentleman did. Other types of plans, such as a 401k, make it even easier to take the money out.
But this is only one example of what can go wrong when you wait to get the QDRO drafted. Sometimes people remarry, then take the money and give it to their new spouse.
In a case that happened a few years ago, the husband retired, took the money out, and then died. All the money went to his new wife. The ex-wife was out of luck because she had not had the QDRO drafted immediately and kept putting it off. The result was a malpractice case against everybody involved. Eventually, the malpractice carriers paid something to her, but far less than what she would have gotten had the QDRO been done immediately.
These are the kinds of things that go wrong when you wait. It’s not always fatal, though. I’ve had cases where people have waited for 10 to 15 years, but because the other person hadn’t retired yet, we were able to get the QDRO entered. In other cases where they had already retired, the court ordered them to begin paying back the money that wasn’t paid. But all of those were at considerable additional legal expense to enforce what would have been a relatively simple QDRO had it been done right away.
Many plans allow the participant to take a loan, so that is another item that can create problems. QDROs often specify what happens if a loan is taken, but if there is no QDRO, the participant can take a very large loan, and effectively wipe out a substantial portion of the amount that would go to the other person.
QDROs can be amended and I’ve actually done that on occasion because the couple delayed doing it. It makes more sense to get the basic QDRO done so you begin to get a percentage of each payment, and then later go after the arrears for all the years that weren’t paid. Though not ideal, it is better to amend than not to do it at all.
So, can you wait to do the QDRO? I always say, don’t wait. Get the QDRO done at the time of the divorce, if at all possible.
Steven L. Abel, Esq.
101 South Broadway
Nyack, NY 10960
(P) 845-638-4666
(E) [email protected]
