Jump to content

20 year old QDRO


Recommended Posts

Background:
1998 QDRO issued / approved,  401K plan administrator (or trustee?) created a separate account for my funds. I've not touched it.  2018 balance about 4 times what it was and I need cash. Best as I've been able to determine (lousy customer service) the plan does still recognize me as an AP and my exemption from 10% penalty still applies. Plan won't allow partial withdrawal, all or nothing only & of course will withhold 20% 
Questions:
1. Does the exemption from 10% penalty apply to all, including the earnings?  
2. When I file my tax return, how do I evidence to the IRS it is not subject to the penalty? (only income tax)
3. If instead I do a direct rollover into a new IRA (losing the QDRO status) and take 72(t) SEPP for a min. of 5 years, when I turn 59.5 in just 3 years, can I make additional penalty free withdrawals over & above the 72(t) distributions? 
4. Other thoughts - am I missing anything, is there a chance the QDRO/penalty exemption "expired",...?
 

Link to comment
Share on other sites

The 1099 issued to you when you take a distribution should be coded to indicate that the 10% penalty does not apply.

Most plans will permit you to take part of the distribution in cash and roll the rest into an IRA, even if they require you to withdraw the entire balance.

Link to comment
Share on other sites

Be careful about the (pre-59-1/2) 10% penalty applicable to IRAs.  That is, if you take it from the plan, roll it to an IRA, and then take an IRA distribution prior to 59-1/2, you will have lost (I think) the exemption from the 10% excise tax.  But double-check in IRS Publication 590-B, https://www.irs.gov/pub/irs-pdf/p590b.pdf

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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...