Can You Buy-Out of a QDRO?

February 19, 2018

The short answer, yes, based on the parties agreement. Courts are reluctant to require anything but a division of retirement/pension plans short  of  parties' agreement.

 

Certainly, before your divorce case is resolved, if the parties agree, one can buy out the interest of the other in a retirement or pension plan. The  result  is that the member/participant retains 100% of his/her retirement/pension and no QDRO (or QILDRO) is needed. However, your divorce decree or Judgment for Dissolution of Marriage would need to contain appropriate language to protect you from having to re-litigate the issue.

 

If you are in the post-decree stage,  typically, the parties can still agree to a buy-out of interest in the other party's retirement or pension plan. This would be accomplished by entry of an appropriately drafted Agreed Order specifying with the term of the buy-out. As in all cases, a Judge can refuse to enter an Order that she/he finds unconscionable, so that is a factor to be considered in advance. 

 

If your Plan Administrator received a copy of your Judgment, or if a QDRO has already been entered, with a certified copy provided to the Plan, the Plan may require very specific instructions on how to proceed (or not proceed). Most Plans will at the very least require a certified copy of an entered Agreed Order, clearly waiving the Alternate Payee's interest in the retirement/pension plan, and will not "unfreeze" your plan until they receive such an Order.

 

What is a fair amount to offer for a buy out depends on a number of factors, including  the value of the plan and the other party's need for funds. A defined contribution plan is more easily valued. The value is the balance, taking  into account taxes and any early withdrawal penalties.

 

A defined benefit plan is more difficult to value. Factors include: when is the earliest the plan will start paying, based on whose life (participant or alternate payee), does the monthly annuity differ based on when you start taking payments, is there a cost of living increase, etc. These actuarial calculations can be performed  by an actuary, and sometimes by an accountant  or attorney with the proper software.

 

The bottom line is that it is never too early to consider buy-out options, and it may never be too late. Start by consulting  an attorney  knowledgeable in this  area.

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