QDRO

[Guest KimElaine]

My husband has worked for Chevron for 24+ years at the refinery in Pascagoula, Mississippi. We have been married for that long a time. We are now divorcing. The bulk of funds that will come to me is from his Vanguard ESOP and annuity. I am not understanding any of this at all, and it is hard to get any clear answers. He would prefer for me to not disturb his retirement annuity. Instead, he would prefer to allocate more ESOP comparable to the amount in the division of the annuity. I am not sure if this is wise to agree with. Does the QDRO allow for any of the monies from this ESOP to be withdrawn without heavy taxes or penalties at the time of divorce or thereafter? I really need some money in hand in order to survive since I may be laid off from my job in a couple of months. Does a divorce attorney handle the terms of the QDRO. or is this up to myself and husband to take care of this separately through another source? Is it possible to borrow from the ESOP? I know I most likely sound completely lost and even pathetic, and this is certainly true in the greatest sense. Thank you for any assistance.

[ETA Consulting LLC]

Does the QDRO allow for any of the monies from this ESOP to be withdrawn without heavy taxes or penalties at the time of divorce or thereafter? I really need some money in hand in order to survive since I may be laid off from my job in a couple of months. Does a divorce attorney handle the terms of the QDRO. or is this up to myself and husband to take care of this separately through another source? Is it possible to borrow from the ESOP? I know I most likely sound completely lost and even pathetic, and this is certainly true in the greatest sense. Thank you for any assistance.

I would ask questions regarding the ESOPs QDRO procedures; whether they allow for immediate distribution.

If so, then you know several things:

1) There is no 10% early withdrawal penalty for early distributions to QDROs.

2) Any amounts you receive from the plan will be eligible for rollover in order to avoid taxes.

3) Since this is an ESOP, you "may" take advantage of a Net Unrealized Appreciation (NUA) strategy, but this treatment will be contingent upon your husband's eligibility for a "LUMP SUM" distribution under the plan (e.g. Age 59 1/2, Severed from employment, death :-), or disability :-) No pun intended on the death or disability)

There is much flexibilty here, so you'd really need to align with someone (perhaps a financial advisor) who knows what they are doing.

Good Luck!

[GMK]

Your QDRO will specify whatever you and your husband agree to. There is no fixed set of rules or answers to who gets what with a QDRO.

You can request a copy of the plan's QDRO procedure. You have a right to receive a copy of the QDRO procedure from the plan. At the same time, ask for a copy of the plan's Summary Plan Description (SPD). These documents won't tell you what you get, but they will inform you about what happens when the QDRO is filed and generally what payment options you have.

If you choose to get some of the annuity, it will pay you for life.

If you choose to get some of the ESOP balance, you can take a portion of it as cash and roll the rest into an IRA. The part that is paid to you in cash is taxable as ordinary income in the year you receive it. The part you roll over to an IRA is not taxed now. It is taxed when you take it out of the IRA, which can be on an 'as you need it' basis. How long there's money in the IRA will depend on how fast you take it out of the IRA.

toolkit's advice to get some professional advice is good. Just be sure that your advisor is familiar with QDRO's. And I would suggest that you find a divorce lawyer who understands QDRO's, too, or has a partner that can advise on QDRO's.

[david rigby]

You can request a copy of the plan's QDRO procedure.

It appears there are two plans: ESOP and "annuity". Get information on each.

[ESOP Guy]

To be very specific the QDRO is going to be whatever you two negotiate it to be as GMK says. (When I say you two that doesn't imply that you shouldn't use good lawyers, but in the end lawyers just advise -- you make decisions)

But for example if your husband values the annuity and you value current liquidity you could agree to to let him have the annuity and you get something of value outside either plan.

I seen the following example. The husband had a PhD and could earn a good living. The wife had a small business and a high school diploma. The husband got 100% of his retirement funds and wife got the house with a very small mortgage and an agreement he would make the house payments for x number of years. He did this because he knew he could get a mortgage again with his earnings. She did this because she knew if she ever lost the house she would never live in the town she was living in again. In short she traded future retirement value for current home equity.

My point is in a divorce everything including the terms of a QDRO are negotiable. That is where good legal advice from someone who knows your situation can really help you.

[Guest Elliot W]

Of all the advise given, the most important is to have your counsel request the summary plan descriptions (SPD's) and QDRO procedures and have them reviewed by an experienced ERISA practitioner. You need to understand what benefits are available and what restrictions may exist on immediate distributions. This will help you and your attorney determine the best course for negotiations.

Good luck.