QDRO Required?

[Guest jvandyke]

We have a participant that is getting divorced. As part of their divorce decree, her spouse is entitled to a part of her 401k. She wants to withdrawal this money to pay him, without getting a QDRO drawn up. The only in-service options this plan allows is a hardship and at age 59 1/2 (which she is not).

Can the plan accept her divorce decree paperwork showing that she owes her spouse this amount without having a QDRO drawn up?

Thanks!

[J Simmons]

She could present the divorce decree to you for review to determine if it meets the statutory requirements (IRC § 414p and ERISA § 206d3) to be a QDRO. If so, then no separate order would be necessary. If not, then the plan may not act unless another order that does meet all those requirements is obtained from the divorce court and presented to you (and you so find it meets those requirements). IRC § 401a13.

[Laura Harrington]

A divorce decree (or even a QDRO) is never going to allow the participant to take an in-service distribution she is not entitled to under the plan document.

Even if she could take an in-service to satisfy this obligation, why would she want to? She would be the one liable for the taxes on the distributed amount, including (presumbly based on the info you provided) an early withdrawal penalty.

As JSimmons said, if the divorce decree meets the requirements of 414(p) it is a QDRO which would allow the plan to assign the indicated portion of her assets to the ex-spouse. But any distribution would be made to the ex-spouse, not to the participant.

[david rigby]

Correct and correct.

Perhaps you can direct the participant to this DOL generic discussion of QDRO's:

http://www.dol.gov/ebsa/Publications/qdros.html

[Guest jvandyke]

Thanks, this information helps me a lot.