Qdro

[Jesse]

New client divorced several years ago and was awarded a hefty sum in of the ex-spouse's 401(k) plan and the plan administrator did not force her to rollover or take the monies out of the plan but instead left the money in the same retirement plan but now in her name.

She is looking at taking some money out under the "hardship" rules and the plan administrator will allow this withdrawal. Since it was set up under the original QDRO are w/drawals from this 401(k) excluded from the 10% penalty as long as taken from this original account?

[Bees Knees]

Section 72(t)(2)(C) says distributions from a qualified retirement plan made to an alternate payee under a qualified domestic relations order is not subject to the 10% penalty.

Note that is says distributions. When did the distribution occur?

The distribution occurs when it is withdrawn from the participant's account and distributed to the alternate payee (the ex spouse). The fact that the ex then decided to have the money kept in an account through the same brokerage firm does not mean that the distribution did not occur. It did occur. So any subsequent distribution cannot be said to have been made due to the qualified domestic relations order. It would thus be subject to the 10% penalty.

[Jesse]

Thanks Bees Knees

I did a little more research as well and have come to the conclusion that the future distributions would not qualify because the decree MUST identify the retirement plan and indicate the amount and number of payments subject to the QDRO.