Tax-Free Retirement Plan Transfer With a Colorado QDRO
A Qualified Domestic Relations Order (QDRO) is a divorce court order to divide retirement plans and transfer a portion to the non-owner Spouse (Alternate Payee.) A QDRO can also be used in Colorado to collect past-due child support or maintenance.
Sometimes it can be used to pay bills such as credit cards and car loans.
The QDRO allows the transfer to be done tax-free to the Participant and also to the Alternate Payee. However, the Alternate Payee will be taxed at the time that he or she takes a cash-out distribution. The Alternate Payee should take care to avoid the IRS 10% early withdrawal penalty if he or she is under age 59.5.
Best time to do a QDRO
If possible, your QDRO should be completed by the time your Decree is signed by the Judge so that the Judge can sign it at the same time your Decree is signed.
Colorado PERA will not accept your QDRO unless it is signed by the Judge and delivered to PERA within 90 days after the Decree. Some Colorado cities and counties are the same.
Also, the Participant usually becomes less cooperative as time goes on. In other words, if two years have passed since the Decree, it is usually much harder to get the Participant to cooperate and sign the QDRO. It becomes another disputed issue. And sometimes it is too late to do a QDRO.
How Long to Do a QDRO (and get paid if payment is your objective)
Usually we get the QDRO drafted and emailed to the parties within 2 business days. Sometimes we are delayed if the retirement plan does not provide its updated QDRO procedures to us promptly.
How long before a liquidation check or electronic transfer is provided? The plans vary widely. Sometimes, but not too often, we can get the QDRO drafted, approved by a Judge, and a cash liquidation payment received within 2 weeks. However, some plans can take months, particularly if a life insurance company is holding the retirement account. The life insurance companies almost always creatively stall until the end of the next quarter so that they can collect their next "end of the quarter" 401(k) fees.
Colorado QDRO Services For a Low Fixed Fee
We offer the following services to attorneys and spouses who divorce (or legally separate) or use a QDRO and/or DRO to divide assets or provide for the payment of child support and maintenance (alimony) obligations, usually for low fixed fees:
- Prepare Colorado divorce QDROs and DROs for all types of private retirement plans, including pension plans, defined benefit plans, 401(k), 457, 403(b), etc.
- Prepare QDROs and DROs for government plans, including state plans such as Colorado PERA
- For government plans such as civil service and federal employee plans, coordinate the plan options with the settlement agreement or permanent orders.
- Coordinate the documents with plan administrators
- Advise as to pension plan matters
The information needed to process a QDRO includes two 1 page forms to download and complete.
Please download and complete these two forms in PDF format: (1) Information sheet; and (2) release and authorization.
The QDRO process is fairly straight forward.
Please ask any questions, but visiting the ask question page or calling (303) 804-9898.