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Divorce


Guest Oakley

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Guest Oakley

As part of our divorce settlement, my ex-husband is entitled to 1/3 of my 401k. I was told we needed to fill out a form (quadro?) Neither of us has an attorney. Any info on how to actualize this transaction would be greatly appreciated.

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If you are willing to live with the consequences of being your own lawyer and operating on benefits that you don't understand, you might get enough rope to hang yourself by asking the 401(k) plan administrator if the administrator has a model domestic relations order or model QDRO. If you get one, it will probably come with disclaimers about how the plan is not suggesting how to divide your benefits or draft an order. Disregard those disclaimers because nothing about your situation could possibly involve any considerations or complexities that would require thinking or knowledge about any issues that are not resolved plainly, fairly and properly for you in the model. Write your own order using the model as a guide.

Send your document in draft form to the plan administrator for review. Modify as necessary to make the form acceptable. Don't worry about any suggested changes because the plan administrator is looking out equally for both of you and will make sure to ask any relevant questions about personal issues that affect the property division to make sure you both get exactly what you intended. You can also count on the plan administrator to be concerned about your personal tax consequences and respective economic circumstances. And the plan administrator will make unsolicited suggestions about things you can get the plan to do for your benefit, even if the suggested action will increase the plan's administrative burdens. Finally, the plan adminstrator will tell you exactly what words to use if any changes are necessary.

Now comes the fun part. The order is an order that must be issued by a court. You need to make the order look like the form of your divorce judgement or decree at the beginning part of the order (names of parties, name of court, docket number). If you don't have a model pleading from your own proceeding, go to the clerk of the court and ask for help with the refinements of the form and instructions about how to file it with the court and how the court will enter the order.

When the order is entered, get a certified copy and send it to the plan administrator, along with an inquiry from your former spouse about procedures for getting the money.

If you live in California, the drill is much easier. The California courts know that the plan administrator knows exactly what you want and are entitled to under California law. So just find a way to get some sort of indication that your divorce has in some way entered the court system, give any old document to the plan administrator that says somebody wants something from the plan. The plan administrator is supposed to do everything else, even without information.

Other resources: The Department of Labor published "The Division of Pensions Through Qualified Domestic Relations Orders,"

available at the Depatment of Labor website. Look for the Pension Welfare Benefits Administration location within the site and use the internal search engine. The publication includes a copy of IRS Notice 97-11, which has sample QDRO language, but is quite cumbersome if you aren't already familiar with QDROs. Private publications about QDROs abound, and should be available at your local law library.

If you are having trouble separating useful information from nasty sarcasm, it may be an example about how helpful advice about cutting corners is a bit of a contradiction.

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This link is the DOL publication referenced by QDROphile: http://www.dol.gov/dol/pwba/public/pubs/qdro.htm

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.

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'tis a worrisome thread.

Oakley,

when you say your ex is "entitled to 1/3 of my 401k", is that 1/3 the value as of a certain date? Or is it 1/3rd the value at whatever time you take a distribution? or is he entitled to 1/3rd the value as of a certain date with adjustments for the investment yield up to the date he receives a distribution? or .... well, as you can see, there many possible interpretations and, unless you are very careful in the way you draft the qdro, your ex may receive a distribution which was not the one you thought he was going to get.

It may be worth the cost to get a qualified attorney (one familiar with qdro's) to help you draft this document.

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I say pass on the attorney (for now) and get help from the plan administrator. Most plan administrators want to do the right thing and help. Some feel that they have as much of a fiduciary duty to the ex-spouse of a participant (the alternate payee) as the participant. An alternate payee has rights under the law similar to a beneficiary of a participant. The trouble is that you are not technically an alternate payee until you get the court order. If your gut tells you that you’re getting bad advice from the plan administrator or the plan administrator is reluctant, then go to an attorney after telling the plan administrator that that is what you are going to do.

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