Jump to content

ESOP & Divorcing with a QDRO


Guest jeafra7

Recommended Posts

Guest jeafra7

My friend is getting a divorce. She is filing a QDRO for her share of her husband's ESOP, it is a small company, her share will be about $ 200,000 worth of stock. She has heard through the grape vine that she "cannot" cash this in till her ex-husband is 55 years old. But one of their friends that worked at the company cashed his in. She can't ask him because he is friends with her ex. How does she find out about cashing this stock in? I guess the attorney for the company is stepping in and putting his two cents in. Her attorney that is doing her QDRO doesn't seem to understand ESOP's very well, she is paying her $ 2000.00 to file the QDRO but can't seem to answer any of these questions. Go figure. I have tried to read up on ESOP's and I have found that some people do cash them in or the "EX" buys the other out.

Link to comment
Share on other sites

She should be able to get a copy of the Summary Plan Description for the ESOP. This summary of the plan should let her know when distributions are allowed from a plan. Most plans will allow for QDRO's to be a distributable event but not always. Once the QDRO is ratified by the sponsor the money should be segregated from her husbands account as described in the QDRO and if the plan allows can then be distributed per the plan's distribution policy.

Link to comment
Share on other sites

Why not ask to court to order the H to provide a copy of the plan document and any qdro procedures? Or ask the company attorney for the distribution rules upon divorce. This should be part of the discovery process.

Link to comment
Share on other sites

Because an ESOP of a private company is invested in non-traded, meaning not liquid, stock, it is very common that ESOPs do not provide for any kind of advanced distribution privileges beyond the minimum required by law. So, it is quite possible that the assets will be tied up for many years. The QDRO cannot require a distribution option that is not available under the plan, other than the specific QDRO rules. Those rules permit the order to request benefits at the date the participant attains age 50, as if the participant terminated employment on that day, but many ESOPs include a 5 year wait before a terminated participant can commence receiving distributions - hence the reference to age 55.

So it is very possible that your friend will have to wait.

The DOL provides some good information on QDROs at http://www.dol.gov/ebsa/faqs/faq_qdro.html

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...