The benefit received under a defined contribution plan depends on the amount of the participant’s account balance and whether the QDRO has provisions that guard against various events that could occur such as if the market goes down which could erode the remaining balance in the account. In other words, the alternate payee may find the investments too risky as part of their divorce settlement and prefers to maintain a lower risk tolerance which can be outlined in the QDRO and agreed to by both parties.

In these circumstances, the QDRO should:

  • Indicate which types of investments the plan administrator should use to determine the growth of the alternate payee’s share of the account balance. There are conditions that need to be set to manage these risks.
  • Define the basis for dividing any gains or losses that arise from the investments in the retirement plan and are assigned to the participant’s account balance between the date the plan administrator approves the QDRO and the date the benefit payments begin.
  • Take into account any cost-of-living adjustments and early retirement incentives
  • Specify how to address a payment that falls short of an anticipated benefit allocation

If the QDRO allows for a participant or alternate payee to obtain a loan these terms need to be clearly spelled out. The terms and conditions around amounts that can be borrowed, when any borrowed amounts need to be returned, the effective interest rate that will be imposed on the borrowed amounts, etc. need to be clearly defined. It is important to note if an alternate payee receives a payout from the plan, even in the form of a loan, the amount borrowed by the participant or alternate payee is deemed a taxable distribution unless the loan amount, plus all prior outstanding loans does not exceed $50,000 or the greater of $10,000 or 50% of the non-forfeiture accrued benefit to the participant under Section 72(p)(2)A)).

QDROs and Defined Contribution Plans are sensitive when it comes to loans. You have to evaluate all of the particulars to make sure the issues are properly handled.

About the Author

Larry Smith is a Founding Partner of Divorce Outcomes, a specialized professional services firm that manages all of the financial aspects in a divorce process. Since 2003 he has worked as a trusted financial advisor, financial advocate, divorce architect and technical financial expert; he is not an attorney. He is an alumni of KPMG and Andersen with expertise in technical accounting, forensics, sophisticated taxation, management consulting, risk management, advanced process engineering, business combinations, divorce management, multi-party negotiations, advanced quality analytics and cognitive performance technologies. Since 1986 Larry has been advising individuals and organizations about innovative financial solutions to resolve complex financial challenges that arise in life and in business.

For both personal and business divorces, Larry is considered an expert in divorce strategies, divorce process management, financial divorce architecture, financial risk management, taxation for divorces, financial divorce forensics, advanced divorce analytics, financial divorce negotiations and mediation, business valuations and sophisticated equity structures. He helps clients shape complex financial decisions, manage communication risks and ever-changing negotiating positions to strategically preserve or grow wealth from these types of transactions.

If You Have a Question

If you have a question, feel free to contact me at [email protected] or 617-680-5222. The call is free. I will spend 30–60 minutes with you. I will provide you an honest assessment as to where I think you are positioned in your divorce process or answer any questions you have. I may provide you some guidance, insight or advice that you can take with you as you wish. There is no obligation to move forward. The phone call is designed to ease your fears, provide you some options to pursue and a potential road to run on that can lead you down a path to achieve a successful outcome.

About Divorce Outcomes

Divorce Outcomes is a specialty services firm that helps people both domestically and internationally manage all of the financial decisions that arise in their divorce process. We are not attorneys. We are financial experts who partner with our clients as their personal financial advocates. We help our clients manage their divorce process, uncover hidden financial risks, architect divorce solutions, manage ever-changing negotiating positions, communicate complex financial matters and close the divorce process as soon as possible with a goal to arrive at the best outcomes possible. Throughout the process we evaluate the current state of our clients’ financial lives with an objective to best reposition their future. We do not sell any products. We simply raise issues that are in our clients best interest. Our clients share with us we:

  • unfold, analyze and repackage their financial life so they are well positioned after their divorce
  • preserve the value of their business or marital estate
  • continuously strive to provide a return on our services
  • build balanced financial solutions grounded in evidence
  • find ways to make our client, and at times both parties, money through the process
  • design their divorce to work for them and their family’s life
  • provide mental clarity to make decisions
  • reduce the total process time from start to close
  • minimize the stress and unpleasant memories that can last a lifetime

As we reach an agreed upon settlement structure, we help our clients identify a fitting attorney who can leverage the financial solution to draft and record the requisite legal documents. Where outcomes are at risk from a traditional process, we function as expert financial negotiators or financial mediators to turn around the situation and achieve our client’s desired outcomes.

Learn more about us at or review our blogs to gain a clearer understanding about our approach and how we maximize the financial outcomes for our clients.


This communication is for general informational purposes only which may or may not reflect the most current developments. It is not intended to constitute formal advice or a recommended course of action as every person’s situation is unique and different. The information here is not intended to be, and should not be, relied upon by the recipient to make a decision without professional guidance.

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