A divorce can turn one of the largest assets a couple owns, a retirement plan, into a legal and financial puzzle that ordinary divorce paperwork cannot solve on its own.

What is a QDRO?

Under federal law, a retirement plan generally cannot pay any part of a participant's benefit to anyone else, but a qualified domestic relations order, or QDRO, is the specific exception that lets a plan pay a spouse, former spouse, child or other dependent, known as the alternate payee, a share of that benefit as part of a divorce, legal separation or child support order.

What must a QDRO include, and what can it not require?

A domestic relations order only counts as a QDRO once it clearly specifies several things.

• the name and last known mailing address of the participant and the alternate payee
• the dollar amount or percentage of the benefit to be paid, or the formula for working it out
• the number of payments or the time period the order covers
• each retirement plan the order applies to

A QDRO also cannot require a plan to pay a type or form of benefit it does not otherwise offer, such as a lump sum from a plan that only pays a monthly annuity, or require increased benefits. The plan administrator decides in the first instance whether an order meets these requirements, and the Department of Labor's own position is that a dispute over that decision belongs in federal court rather than the divorce case itself.

How does dividing a 401(k) differ from dividing a pension?

A 401(k) or other defined contribution plan holds each participant's money in an individual account, so a QDRO can typically assign the alternate payee a stated dollar amount or percentage of that account as of an agreed date. A pension, a defined benefit plan, instead pays a monthly amount set by a formula instead of an account balance, so dividing it usually calls for an actuary to put a present value on the alternate payee's share.

What are the two main ways a QDRO can split a benefit?

Plans generally divide a benefit under a QDRO one of two ways. A shared payment approach pays the alternate payee a portion of each payment the participant actually receives, so nothing changes hands until the participant starts collecting, while a separate interest approach gives the alternate payee an independent right to their own share, one that can start, and be paid in a form, different from the participant's own benefit. Either approach still has to work inside whatever payment options the plan already offers.

Does the 10% early withdrawal tax apply to a QDRO payment?

The IRS lists a payment to an alternate payee under a QDRO as one of the named exceptions to the extra 10% tax that otherwise applies to an early distribution from a qualified retirement plan, so an alternate payee who receives money this way generally does not owe that tax even before age 59 1/2. That exception belongs to qualified employer plans; the QDRO rules themselves do not apply to IRAs, which are split between spouses under a separate transfer-incident-to-divorce rule instead.

Who pays tax on a QDRO distribution, and can it be rolled over?

A spouse or former spouse who receives a QDRO payment generally reports and pays tax on it much like the participant would have, including a share of any after-tax money already in the account, and can roll an eligible distribution into an IRA within 60 days to put off paying tax on it. A payment made instead to a child or other dependent under a QDRO is taxed to the plan participant, not to the child.

That 10% exception does not travel with the money once it moves into an IRA. The IRS's own written explanation of the rollover rules says that once rolled-over money sits in an IRA, a later withdrawal before age 59 1/2 is judged under the ordinary IRA early-withdrawal rules, not the QDRO exception.

What happens to survivor benefits after a QDRO?

The federal rules that give a married participant's spouse a survivor annuity under a pension can extend to a former spouse: a QDRO can require the plan to treat the alternate payee as the participant's surviving spouse for the qualified joint and survivor annuity and the preretirement survivor annuity. Without language like that in the order, a divorce can otherwise end a former spouse's claim to those survivor benefits.

On the defined contribution side, most 401(k)-type plans still pay a married participant's remaining account to the surviving spouse by default when the participant dies without a valid, consented-to change on file, so a settlement or QDRO meant to redirect part of the account usually needs its own beneficiary paperwork in addition to the order.

Who reviews a QDRO, and is there a cost?

Once a plan receives a proposed order, the administrator has to follow its own written procedures to decide whether it qualifies, notify the participant and the proposed alternate payee, and keep the disputed amount set aside while that review is underway. For a defined contribution plan, the Department of Labor has taken the position that the administrator can generally charge the cost of that determination against the account of the participant or alternate payee seeking it, so it is worth asking the plan for its QDRO fee schedule and naming in the order which side pays it.

Where Raytheon's own 401(k) and pension sit inside all of this, down to which payment forms they actually offer and how their survivor rules work, is the detail a QDRO has to be written around.

What retirement accounts could a QDRO reach at Raytheon?

Raytheon's own retirement plans carry the same detail that any QDRO written against them has to get right. Raytheon's 401(k) accounts sit in the RTX Savings Plan, a defined contribution plan where each participant holds an individual account that a QDRO can typically assign as a stated dollar amount or percentage. Raytheon's pension, the RTX Consolidated Pension Plan, pays legacy Raytheon participants' service after December 31, 2022 under a cash balance formula, and the plan's December 31, 2023 merger of Raytheon's remaining pension plans into it left those benefit formulas unchanged. At payout, Raytheon lets a retiring employee choose between a lump sum and a monthly annuity from that cash balance account, with the lump sum shrinking as the plan's monthly updated interest rates climb. Whichever Raytheon account a QDRO names, checking which payment options the plan actually offers is worth doing before the order goes final.