Division and Timing of a Colorado QDRO

Summary:  The QDRO is valued and divided as of the date of the Decree or the date of the Permanent Orders hearing, if the hearing precedes the date of the Decree. Or otherwise by agreement of the parties. Later changes in the value are borne by the respective owners of the plan which was divided by the QDRO. During periods of stock market decline, the issue of timing and valuation has become a hot topic because of the decline in plan values.

What is the Date of the Division and Valuation of the Plan?

In Colorado, the court must value and divide all marital property as of the date of the Decree. Except that if a Permanent Orders hearing precedes the date of the Decree, then the date of the Permanent Orders hearing controls. See C.R.S. 14-10-113. Also, there is a fair amount of Colorado higher court case law which holds that property "is valued as of the date of the Decree." For example, see In Re Marriage of Price, 680 P.2d 1298 (Colo.App. 1983.)

However, as a practical matter, in most cases the date of valuation will be different than the date of the Decree or the Permanent Orders hearing. The reason is that in most cases a Separation Agreement will be used where the value is agreed upon based on an account statement that is a month or two old. Also, often at a Permanent Orders hearing the Judge will order a division of assets which does not depend on a precise retirement plan valuation.

When is the Best Time to Do a QDRO?

The ideal time is to complete and submit the QDRO to the court at the same time that the Separation Agreement is submitted. Or, include a draft at the Permanent Orders hearing.

If the QDRO is not completed early, then often disputes arise later over the provisions of the QDRO. Especially if a defined benefit pension plan is being divided. If a defined benefit plan is being divided, then the parties may argue over whether a shared interest or a separate interest QDRO should be used. And if a shared interest approach is used, then will a joint survivor annuity be given to the new owner and also who pays for it?

How Late Can a QDRO be Done?

The length of the time period during which a QDRO can be processed after the divorce is final is usually determined by the retirement plan administrator.

For example, Colorado PERA (for state employees) will not accept a QDRO after 90 days. Otherwise, federal ERISA law which governs private employer plans requires that the plan keep records for the prior 18 month period. Thus, with private employer plans, you should always have at least 18 months to do them after the divorce. (But sometimes a QDRO can be processed years after the divorce.)

However, usually the longer the time period after the divorce, the more difficult the process is getting the agreement of the parties. So, do it sooner rather than later.

How are Changes in Plan Values and Plan Provisions Treated?

After the QDRO is processed, the new share which goes to the Alternate Payee is subject to the same plan changes and the same earnings and losses as the employee Participant's share. Everything is determined as of the date of the divorce. In most cases, the Alternate Payee is treated like a retired employee (except as to some defined benefit plan provisions.)

But, even if the QDRO has not been processed, the same is true as to earnings and losses because the date of valuation and division is the date of the Decree (or the Permanent Orders hearing.) This is the reason that QDROs are drafted with language which states that the earnings and losses are allocated between the parties as of the date of the Decree.

In other words, any delay in the processing of the QDRO does not change the valuation or date of division. In Re Marriage of Wells, 833 P.2d 797 (Colo.App. 1991.)

The rights of the parties in a divorce action are determined by the Decree and final Orders. That is a final judgement which cannot be changed (absent earlier fraud.) In Re Marriage of Sorenson, 166 P.3d 254 (Colo.App. 2007).

Also, there is a recent Texas Court of Appeals QDRO dispute case which is right on point. Download it and review it.

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