QDRO - Both parties are participants

[Disco Stu]

Howdy

I have a divorce situation where both husband and wife are participants in the plan. I haven't seen a DRO yet, but the question came up regarding moving balances between the two accounts in the plan.

I don't see anything wrong in doing that. I'm wondering about recordkeeping the accounts after the QDRO. I'm thinking the QDRO dollars would need to be accounted for separately...mainly because of the fact that an alternate payee isn't subject to the early withdrawal penalty on a QDRO distribution.

I assume that things like this aren't totally uncommon. Anyone out there have any insight on this situation or disagree with any of my assumptions? I get this feeling there are things that I haven't thought of.

Thanks for any input.

[Guest JimJ]

Disco Stu - never have come across this personally but I would pursue the same line of thinking. Only one question. Will your recordkeeping system allow for the same social twice? If not, how to handle? (additional source for only two participants, fake social ???)

JimJ

[Erik Read]

Let's look at it from another prospective -

If your firm had the account for one spouse and the assets were being rolled over due to QDRO - you'd probalby title the source as rollover - right? If so, does your software note that the rollove amount isn't subject to EWP? If not, you'll probably need to list the source as QDRO.

Next point - I don't think you'd need the two socials, just another source of assets for the participant's account - deferrals, match, discretionary, rollover and or QDRO.

Right?

[david rigby]

Not so sure it's a good idea. Does the plan permit it? (I admit, I'm not sure a plan has to explicitly state this. Just trying to be cautious.)

If the account is divided, what would you do if the spouse had not been a participant? Would the Alternate Payee have an account set up for the divided portion? If so, what rights would that AP have, such as withdrawal, investments, loans, etc. It seems that you do not want to combine the divided portion for the AP if it might "muddy" the understanding of these questions and/or any other administrative function.

[RCK]

This may sound like a dumb question, but here it goes anyway.

I realize that when the alternate payee takes a distribution from the original plan, that distribution is not subject to early withdrawal penalties. But if they roll that distribution over to their account in a different qualified plan, is it still entitled to a free pass from EWP, and if so is it only the dollar amount of the rollover, or the portion of the entire account attributable to that rollover (initial amount plus gains/losses)?

RCK

[Erik Read]

Great question - somewhat ties back to my info - the payment is sheltered from EWP - and what I was wondering is how the admin is noting that in their software. I haven't seen much software that will flag "rollover" accounts as exempt from EWP. So you'd have to have a QDRO account set-up or something similar in order to keep track.

As for the gains portion - that's one for the CPA's on the board to answer!