Some spouses of military service members can receive part of their ex’s military retirement benefits following divorce. In order to receive these benefits, the spouse must receive a court order that provides for disbursements from military retired pay and the specific amount that shall be paid.
The court order also needs to demonstrate the court’s jurisdiction to issue the order by way of the Uniformed Services Former Spouses Protection Act. This is usually done through a Qualified Domestic Relations Order (QDRO).
What information does a QDRO need to contain?
A QDRO is a term used by the Internal Revenue Service (IRS) to describe a court order dictating a retirement plan to pay alimony, child support or other property rights to an ex-spouse, child or dependent.
According to the IRS, a QDRO needs to contain special information in order for it to be valid. There are two main categories of information that a QDRO must contain. These are:
- Personal contact information: The QDRO needs to have the names of the payees as well as the retirement plan participant’s name, the most recent mailing address and other contact information for all of the parties.
- Amount to be paid: The percentage and/or specific amount of retirement benefits that will be paid out to the payees.
Additional rules related to QDROs
A QDRO will not be valid if a judge orders payment of a benefit that cannot be paid through the plan. For example, if a judge orders a retirement plan to pay more money than it has available to be paid, then the QDRO will not be valid.
All beneficiaries of a QDRO must report the income received from the retirement plan to the IRS as if they were the original retirement plan beneficiary. Similarly, IRS tax liabilities will be incurred by the payee beneficiary of the QDRO as if he or she were the original beneficiary of the retirement plan.
If a child or dependent receives QDRO distributions, then the original retirement plan participant will be the one to pay taxes on that income. Some individuals may be permitted to rollover all or a portion of the QDRO benefits tax-free when they relate to a qualifying retirement plan.
Were you awarded a Qualified Domestic Relations Order?
Former spouses of military service members who received a QDRO related to their divorce may want to learn more about QDROs and how they work. A QDRO can represent a financial lifeline to ensure you keep your retirement benefits and stay financially solvent in the years after your divorce.