Conduit IRA

[Guest 401kWorker]

Will an alternate payee maintain the right to withdrawal monies without early withdrawal penaltys, having rolled over to a conduit IRA ?

[Mary Kay Foss]

After a rollover, the IRA is treated as if it had always belonged to the new owner. Anything the previous owner could do, can be done by the new owner. Thus, any basis that the former owner had is allocated prorata to the alternate payee.

A 72t stream of payments can come from the new IRA.

[Appleby]

Just to Mary Kay’s comments…If you receive money from a 401(k) plan as an alternate payee in a qualified domestic relations order (QDRO), any amount that is distributed to you as a result of this QDRO is exempted from the 10 percent early distribution penalty. However, once the amount is rolled to an IRA, it becomes subject to the IRA rules---this means that any distributions that occur from the IRA will be subject to the early distribution penalty, unless you meet one of the exceptions, which includes 72(t) payments as Mary indicated. ... The list of exceptions for IRAs do not include distributions due to a QDRO