qdro terms and definitions

Account Balance : The value of a  Participant’s defined contribution plan or defined benefit cash balance plan as of a specific date.  

Account Segregation : The date on which a separate account is established for the benefit of the Alternate Payee and the awarded amount is transferred from the Participant's account to the Alternate Payee's account.

Alternate Payee :  The person who is being awarded all or a portion of the Participant's retirement benefits and must be a spouse, former spouse, child or other dependent of a participant.

COAP : A Court Order Acceptable for Processing, which is the term OPM uses for qualified division orders for the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS).

RBCO : A Retirement Benefits Court Order, which is the term the Thrift Savings Plan (federal employee) uses for division orders.

Date of Division, Determination Date or Allocation Date : For  Defined Contribution Plans and Cash Balance Plans Only. For purposes of a QDRO this is usually the date of divorce unless another agreed date is being used by the parties, such as date of mediation. Normally, the Alternate Payee would be entitled to gains and losses on the amount awarded, determined at Date of Division until actual distribution to the Alternate Payee, unless the Decree states differently.

Defined Benefit Plan :  A Defined Benefit Plan is a plan that provides a specific formula to determine the participant’s monthly retirement benefit.   In plans of this type, individual accounts are not maintained and a lump sum $ amount can't be awarded, unless the Plan has lump sum benefit options.  Many traditional defined benefit plans monthly annuity payments) have been recently converted to Cash Balance Plans in which a separate account is maintained, similar to a 401(k).

Defined Contribution Plan :  A Defined Contribution Plan is a plan which maintains a separate account for each participant.  Benefits are based on the amount contributed to the participant’s account by the participant and matched by the employer, plus or minus any income, expenses, gains or losses attributable to that account.  The QDRO must clearly state whether or not the Alternate Payee’s benefit will be adjusted for earnings (gains and losses) from the date of division through the date of account segregation.   If a specific dollar amount is awarded (instead of a %),  and the QDRO states that the Alternate Payee is to share in gains and  losses (earnings), the Alternate Payee will not receive the exact dollar amount awarded.  It may be more, or it may be less, depending on whether the market goes up (Alternate Payee will receive more) or if the market goes down (Alternate Payee will receive less).

ERISA : Employee Retirement Income Security Act of 1974, as amended.

Loans : If a QDRO awards the Alternate Payee a specified percentage of the Participant’s vested account balance, the QDRO must indicate whether the percentage is calculated "including" or "excluding" any outstanding loan balances as of the date of division. If a loan balance is "Included", the amount of the loan balance is not deducted from the total account balance prior to calculating the Alternate Payee's share (Alternate Payee receives more money).  If the loan balance is "excluded", the total account balance is reduced by the amount of the loan balance prior to calculating the Alternate Payee's share (Alternate Payee receives less money). 

Lump Sum : A form of benefit payment in which the entire benefit is paid at one time, in one payment, whether as a cash distribution or a rollover.

Participant : A member of a retirement plan. A participant is said to participate in or be covered  by the plan. The Participant is the spouse whose retirement plan you are  dividing. The spouse that is to receive benefits under the QDRO is the Alternate Payee.

Plan Administrator :  The person or persons who administer the plan.  Sometimes the Plan Administrator is the employer. Sometimes it is a third party. 

Qualified Domestic Relations Order :  A Qualified Domestic Relations Order ("QDRO") is a Domestic Relations Order ("DRO") that has met the specific requirements under federal law (ERISA) and the provisions of the  Plan as determined by the Plan Administrator. A QDRO requires a qualified plan to pay all or any part of a Participant’s benefits to an Alternate Payee.  If the Participant's retirement plan is not being divided (Participant keeps 100%), no QDRO is required, although the Plan Administrator may want a copy of the Decree to confirm the Plan was not divided. 

Vested Benefit or Vested Account Balance : A Participant’s right or entitlement to benefits under a Defined Benefit (Vested Benefit) or Defined Contribution Plan (Vested Account Balance).  Becoming 100% vested in a Defined Benefit Plan is the point at which the Participant has satisfied the plan requirements for vesting, and the benefit entitlement is no longer contingent on remaining in service with the employer.  Under a Defined Contribution Plan, employee contributions are always 100% vested; however, employer contributions may be subject to a vesting schedule.