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QDROs and 72(m)(10)


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We received a 401(k) Plan QDRO that assigns to the Alternate Payee (a former spouse) 50% of the Participant's account balance, to come from the Roth portion of the Participant's account balance. The Participant has both Roth and pre-tax contributions in his account.

72(m)(10) provides that if the Alternate Payee is a former spouse, the "investment in contract" must be allocated pro-rata between the Alternate Payee and the Participant. "Investment in contract" is defined in other subsections of Section 72, but only for those specific subsections.

Would 72(m)(10) require that the Roth and pre-tax money types be allocated pro-rata between the Participant and the Alternate Payee? Or can I allow the account to be divided to give the Alternate Payee money exclusively from the Roth portion of the Participant's account?

Thank you!

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Internal Revenue Code section 72(m)(10) states: “Under regulations prescribed by the Secretary, in the case of a distribution or payment made to an alternate payee who is the spouse or former spouse of the participant pursuant to a qualified domestic relations order (as defined in section 414(p)), the investment in the contract as of the date prescribed in such regulations shall be allocated on a pro rata basis between the present value of such distribution or payment and the present value of all other benefits payable with respect to the participant to which such order relates.” More than 31 years after the 1984 enactment of the quoted statute, no rule or regulation to interpret section 72(m)(10) has been adopted, or even proposed.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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