No QDRO

[thepensionmaven]

Husband and wife have two separate businesses, each has a pension plan, we are the TPA for both.

I had suggested a QDRO years ago, neither party went with the idea. Probably neither wanted to pay or the attorneys talked them out of it.

Five years later the divorce is final and the wife is to get $x as part of the divorce decree and wants to roll it into her plan.

Absent a DRO, I believe the full amount is taxable to herald she can not roll it into her plan???

[david rigby]

No DRO? She can't get anything from his plan, at least not directly from the plan.

[thepensionmaven]

I had another client several years ago who did have a QDRO. The financial institution insisted on a separate account for the spouse as a participant in his pension plan. Once the funds were in the account, she took the distribution as a terminated employee who was over 59 ½ anyway, and rolled over to her own plan.

[ESOP Guy]

I am with David, without a QDRO what is the distributable event? This person isn't terminated if they were never an employee.

How do you separate the accounts without a QDRO? You just violated the husband's anti-alienation rights-- even if he isn't objecting.

[Lou S.]

No QDRO no distribution. If Hubby is eligble for in-service of somekind he can take and give to ex-wife but taxes will be hubbys.

[thepensionmaven]

Lou,

Thanks.

Could you give me a citation?

[My 2 cents]

Lou,

Thanks.

Could you give me a citation?

You aren't looking for a citation that it would be taxable to the participant, are you? I expect that if it is paid to the participant, it is taxable to the participant. Paying money to an ex-spouse in accordance with a divorce decree not encompassing a QDRO would be satisfied using after-tax dollars. I am not up on the tax rules enough to know, but payment from personal assets to satisfy a divorce decree or alimony might be a deductible expense to the paying ex-spouse, might be taxable to the receiving ex-spouse.

Payment under a QDRO would be a different story, since the money would have been paid directly to the ex-spouse, but that is apparently not the case here.

[Bill Presson]

Husband and wife have two separate businesses, each has a pension plan, we are the TPA for both.

I had suggested a QDRO years ago, neither party went with the idea. Probably neither wanted to pay or the attorneys talked them out of it.

Five years later the divorce is final and the wife is to get $x as part of the divorce decree and wants to roll it into her plan.

Absent a DRO, I believe the full amount is taxable to herald she can not roll it into her plan???

I think you're making a mistake trying to help them figure out a way around a DRO. What if she decides to get one later? Getting money from a retirement plan is why DROs exist.

[Belgarath]

Pension Dude - check out IRC 402(e), which provides the "QDRO exception." Any payment made to a spouse or former spouse under a QDRO is taxable to the alternate payee.

If the participant just took a permissible in-service to pay the former spouse, without the QDRO, it would simply be a taxable distribution to the participant.

[ForksnKnives]

It's not too late to have a DRO drafted and ordered by the court.