QDRO early distribution penalty

[Guest zimmer]

I represent a client who is the alternate payee on a QDRO. Can she cash this check without being subject to the 10% early distribution penalty or is this a distribution exempt under 72(t)?

[Guest Bill]

A distribution made because of a QDRO is taxable to the alternate payee but NOT subject to the 10% premature distribution tax. A distribution to a spouse or former spouse also is eligible to be rolled over to an IRA or other qualified retirement plan.

[Dave Baker]

But once the pension funds are rolled over into an IRA, they become subject to the 10% early distribution penalty (if the alternate payee is younger than age 59-1/2 and is not disabled).

[Guest zimmer]

Thanks for the info. I thought my client would be exempt from that 10% penalty but just wanted to get some additional insight.

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