Dividing Retirement Plan Assets with a QDRO
	General Rule. Usually retirement plans are marital property and must be divided whenever there is a divorce.. Federal ERISA and tax laws allow you to divide retirement plans in a divorce without having to pay income tax or the 10% early withdrawal penalty.

General Rule for Dividing a Retirement Plan in a Colorado Divorce

Under Colorado (and all other states) law, a court must order the equitable (fair) division of marital assets. (Usually this means a 50-50 split, but not always.)

Most assets, such as the equity in a home, bank accounts, investments, and equity in vehicles is done by assigning specific assets to each spouse and by transferring money or other liquid assets from one spouse to the other.

Retirement plan assets are marital assets which must be equitably divided or taken into account, just like any other marital asset.

Why Retirement Plan Assets are Different

However, retirement plan assets are very different from other marital assets. Because the plan participant (employee) is not free to liquidate or transfer part of a plan to any other person. Or, if such a transfer can be made, the plan participant must pay a very stiff income tax bill, including in most cases an additional 10% penalty.

A transfer of a retirement plan asset cannot be done unless a special form of a court order is used. Such a court order allows the transfer of retirement plan assets to a former spouse, and it allows such a transfer to occur without the payment of any income taxes by the plan participant (employee).

If the retirement plan is sponsored by a private employer (such as a utility company, a furniture store, a car dealership, etc.), then the special type of court order is called a Qualified Domestic Relations Order (QDRO).

If the retirement plan is a government type plan, such as Colorado PERA, then other court orders must be used. Although government plans are not divided through the use of a QDRO, the general procedure and effect are similar to the use of a QDRO.

So, in other words, a retirement plan cannot be divided as easily as other marital assets.

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