The GAO Reviews QDROs

In July 2020, the Government Accountability Office (GAO) prepared a report for the Ranking Member of the Senate Committee on Health, Education, Labor and Pensions about Qualified Domestic Relations Orders (QDROs). QDROs are court-issued orders that allow a divorced spouse (or in rare cases a child) to receive a portion of a participant’s qualified retirement plan benefit. A QDRO is one of the few ways in which a participant’s qualified retirement benefit can be assigned or alienated.

The report’s two key findings were to encourage the Department of Labor (DOL) to:

  • Find ways to collect data on the fees that defined contribution plans charge to participants or alternate payees for reviewing QDROs
  • Improve divorcing parties’ access to information about the QDRO process.

If you are a defined contribution plan sponsor, in light of the GAO’s report and recommendations it may be a good time to review the fee your plan charges for the review and processing of a QDRO (if any) to evaluate whether the fee is reasonable for the costs associated with the QDRO-qualification review. The GAO reports that typical fees for a QDRO review are between $300 and $600. Of the seven non-public large-plan sponsors that completed the GAO survey, five did not charge anything for a QDRO-qualification review and the other two charged $300 and $350, respectively. Keep in mind also that QDRO-related fees should be disclosed in the summary plan description for the plan, as well as in a plan’s participant fee disclosures.

Additionally, if your plan does not have a model QDRO document that can be provided to interested participants or potential alternate payees, you should work with your recordkeeper or legal counsel to prepare a model QDRO draft for your plan.

If you’d like help preparing a model QDRO document, please reach out to your Faegre Drinker benefits counsel.

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