Rollovers

[Felicia]

A husband and wife are each covered by their own 403(B) plans. They are getting divorced and will have a court order (not a QDRO) to divide their respective 403(B)s. In 2002, will each ex-spouse be able to roll over his/her alternate payee distribution into his/her own 403(B)? Would the answer be the same if there is a QDRO? Cites would be helpful.

[Carol V. Calhoun]

Why would the court order not be a QDRO? For a plan subject to ERISA, compliance with a court order that is not a QDRO is impermissible.

Assuming that the court order is a QDRO applicable to an ERISA plan, or a domestic relations order applicable to a governmental or church plan, a spouse who is an alternate payee is treated as the distributee, and therefore permitted to make rollovers if the distribution is otherwise eligible for rollover. (Code section 402(e)(1)(B), as incorporated by reference in Code section 403(B)(8)(B) for QDROS; Code section 414(p)(11) for domestic relations orders applicable to governmental and church plans.)

[Guest dynalow]

Something to be carefull about here if your under 59.5

Whether its a court order or a QRDO, the 403b funds from each ex- spouse are split and are awarded to each other, each spouse will get a new 403b contract(regardless if they allready had one or not), they get the funds in 403b form and for the purpose of that awarded money they are treated like a terminated employee(even if they are employed by same employer). The TPA could combined the funds as long as they maintain identity of the funds awarded through divorce. The money should be kept seperated for that reason and also distributions from the contract would not be subject to the 10% penalty if under 59.5.

Heres the thing, If you get awarded 403b funds from an expouse, if you take a cash withdrawal before 59.5 theres no penalty. If you rollover the 403b to an IRA and take a withdrawal from the IRA before 59.5 you would be subject to the 10% penalty. The 403b may also allow for loans if needed.

I hope this helps.