You Gotta Get That QDRO Done

What happens when a divorce decree calls for a QDRO to divide retirement plans, and then the parties let it languish? What happens if the value of the account or accounts divided has changed dramatically by the time the QDRO gets implemented? The Alabama Court of Civil Appeals dealt with this question in Jardine v. Jardine, Case No. 2030454 (Ala. Civ. App. June 30, 2005).

The decree (July 20, 2001) called for a division of the five retirement plans held by the husband and wife, with the wife to receive “a sum equal to forty-five percent (45%) of the collective total” and the husband to receive 55%. From time to time, each party in this highly litigious couple failed to provide necessary information for the QDRO to be completed, and it was still unfinished more than two years later. In the interim, as nearly every investor can remember ruefully, the value of the various accounts declined dramatically.

On November 3, 2003, the trial court, attempting to clarify its July 20, 2001 order, in effect assigned to each party his or her pro rata share of the intervening losses. The wife appealed.

The wife argued that the trial court’s 2001 order was unambiguous, that she was entitled to a sum equal to 45% of the accounts as they existed on June 30, 2001, and that the 2003 order was an impermissable modification of property division more than 30 days after the divorce decree.

The Court of Appeals rejected the wife’s argument and affirmed. The Court of Appeals said the trial court’s order became ambiguous with the passage of time, because it failed to describe how the earnings and losses would be allocated if there were a change from the June 30, 2001 date, and because it failed to anticipate that the parties would wait so long to implement the QDRO.

The problem here is that the parties failed to execute the judgment in a timely fashion. As a result, the judgment was no longer susceptible to execution in the manner contemplated by the judgment itself — namely, an award to the husband of 55% of the combined market value of the retirement- account assets as of June 30, 2001, and an award to the wife of 45% of the combined market value of the retirement-account assets as of June 30, 2001. Thus, the judgment necessarily is “ambiguous” in the sense that it does not tell the reader what result should obtain under the new facts that developed after the judgment had been entered.

There is an unusually blunt interplay between Judge Murdock’s majority opinion and Judge Crawley’s dissent. In his dissent, Judge Crawley takes the position that the use of the words “a sum equal to” made the 2001 order unambiguous and that the wife should have received 45% of the 2001 value.

There are two morals to this story. The first is that there are lots of things that can happen if you call for a QDRO in a divorce decree and then don’t get it done quickly, and almost all of them are bad.

The second is that problems like the one in Jardine can be avoided (or at least minimized) by wording more carefully the provision for retirement plan division. Here’s the language I use to divide retirement plans, and from what I’ve seen, it’s typical: “The Husband will assign to the Wife _____% of the vested balance in his account in the ____________ (name of retirement plan), valued as of June 30, 2005, together with earnings and losses accruing to such account between the valuation date and the date of distribution. The Husband will pay the cost of the QDRO. The court hereby reservers jurisdiction for the implementation and modification of the QDRO as needed.”

The above language would have made the court’s 2001 decree clear and therefore easier to enforce.

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