Many pension plans provide model QDROs in order to expedite the approval process. Although it may speed approval, their model language often does not have the best interests of the alternate payee in mind, which often makes using a model QDRO costly.
Some lawyers draft a QDRO using the plan’s model QDRO and insert the parties’ names with little or no other revisions. A fill-in-the-blanks approach should never be done unless everyone involved clearly understands every single provision. More so, everyone should understand the possible alternate provisions, based on the plan’s terms and the jurisdiction’s law regarding marital property rights.
Plan administrators create model QDROs to reduce the plan’s administrative expenses by streamlining QDRO review and approval. They find it easier to review QDROs that use a pre-established model rather than to review hundreds or thousands of QDROs prepared in different ways. Plan administrators want to reduce the number of missing key provisions by providing a model QDRO because this reduces the back and forth with lawyers that increases costs to retirement plans.
Most model QDROs are drafted to favor the plan participant, and they are not drafted to divide the benefits as equally as possible. Model orders can heavily favor the participant with regard to issues like investment earnings and losses and survivor benefits.
Further, the model QDRO may have been drafted in a different state than where the divorce took place. The law of the jurisdiction can have a huge effect on the division of benefits. For example, in California, which is a community property state, the community property interest stops accruing on the parties’ date of separation. Other states, however, utilize dates, such as the date of divorce filing or the date of the entry of Judgment of Dissolution, both of which may be years after the parties’ date of separation. Thus, a model QDRO from another jurisdiction may award the alternate payee far more benefits than he/she would receive in California. Further, many individuals who draft their own QDROs are not able to format the QDRO correctly to be accepted by the court that handled their divorce. In California, QDROs must be signed by both parties and the judge; however, many model QDROs only leave space for the judge’s signature.
