NCPA - National Center for Policy Analysis


November 12, 2004

It is getting more expensive to get a divorce -- and the extra bite is coming out of couples' retirement plans, says the Wall Street Journal.

People are just starting to feel the impact of the barely noticed Labor Department policy change, which lets employers withdraw certain legal fees required for dividing up defined-contribution retirement plans such as 401(k)s from a divorcing employee's account. Previously, employers could choose between paying those costs themselves and splitting them among all plan participants.

  • The fees surround a legal document called a qualified domestic relations order, or QDRO (pronounced QUA-dro), that a divorcing couple must submit to a plan sponsor in order to split retirement accounts and retain tax benefits. QDROs contain basic information about how the money should be divided.
  • Under federal law, a QDRO doesn't technically become "qualified" until an employer makes sure it fits certain requirements of the tax code, processing that can run from hundreds to thousands of dollars, depending on how much legal advice a company needs.

US Airways Group Inc., which recently outsourced QDRO processing to Fidelity, began charging individual accounts in June -- $300 if employees use one of Fidelity's Web-based QDROs and more if they don't.

To be sure, such charges may barely be noticeable, considering what divorces in the United States cost today. But QDRO fees can get very high if employers don't have set charges. For example, processing can run up to $10,000 if an employee repeatedly sends in an incorrect QDRO or up to $30,000 if disputes arise between employees and employers over how plans can be split, lawyers say.

Source: Jennifer Saranow, "Cost of Divorce Just Went Up- in Your 401(k)," Wall Street Journal, November 9, 2004.

For WSJ text (subscription required),,SB109995793103568237,00.html


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