Fidelity will only release retirement with a QDRO. Options??

[paterinick]

Wife and I would like to get access to our retirement account to pay off debt at this time. 

Fidelity has stated that the only way to do so would be a court order.  QDRO.  Is there anything that an attorney can do,  as I have one and just needed to know what we would like to file and how.

It's a state retirement fund through a university.  It was a ASRS fund but got switched to Fidelity.

Thanks and I'm not familiar with any of this stuff at all.

 

 

[401king]

You're still working for the university, correct? If so, then Fidelity is probably correct. You can always double-check with your HR if they happen to be familiar the the plan's rules. 

Many companies, such as your employer, restrict participants from accessing their funds until they are retired/severed from service...and there's no way around it (except pandering to those who have the ability to change your Plan's rules). 

Good luck!

[GMK]

Sometimes there are options to get at the funds if you have achieved a superior age (which means if you're old, like me). Following 401king's advice, that would be something to ask about when you contact your HR people.

[ESOP Guy]

Does the plan allow for loans?  I know that is swapping one kind of debt for another but the terms and interest rates might make it worth while.

I would add your plan might be a bad idea from a tax point of view.  If you are under 59.5 if you get the money you have to pay income taxes (could be 20% to 25% easily) plus a 10% early distribution excise tax plus state taxes (could be 0% to 9%). 

So you could find taxes will take 40% or more of your distribution when you get done paying all the taxes.  That is an expensive source of funds.  You might want to get some financial advice first. 

I would add if you are in real bad shape and you think bankruptcy is in your future as a general rule money in retirement plans is exempt from being taken in bankruptcy.  So the only way your creditors can get that money in case of bankruptcy is if you first take the money out on your own.  They can't force you to do so as a general rule. 

So at risk of repeating myself you might want to get some financial advice before you take money out of retirement funds. 

[Lou S.]

Information on In-Service Withdrawals, if allowed, will be in your Plan's Summary Plan Description which you should already have. You answer is likely in there.

As others have said, check with your HR on plan provisions but Fidelity is probably correct in this case.

[paterinick]

HR has stated it's up to Fidelity.  They have no say in the plan.

Fidelity has stated they need a court-order.  I "think" the only option would be for a QDRO, which is unfortunate when you are under financial dis-stress.  Looking at the amount of taxes you would pay on taking out from the retirement is scary also...

Yea,  bankruptcy isn't the worst idea but would talk with a financial planner for sure before pursuing that option.

[Lou S.]

3 minutes ago, paterinick said:

HR has stated it's up to Fidelity.  They have no say in the plan.

Fidelity has stated they need a court-order.  I "think" the only option would be for a QDRO, which is unfortunate when you are under financial dis-stress.  Looking at the amount of taxes you would pay on taking out from the retirement is scary also...

Yea,  bankruptcy isn't the worst idea but would talk with a financial planner for sure before pursuing that option.

I seriously doubt that is true. The folks in HR may in fact have no say but Fidelity is us administering the terms of the plan set by the employer they aren't making them up themselves.

Generally for a 401(k) plan you can get money out in limited circumstances: separation of service, death, disability.

In-service distribution may be offered but there are limits and if you aren't age 59.5 in most cases won't be available.

You may qualify for a hardship distribution if your plan allows for them, you might take out a participant loan as someone else suggested or you could get a QDRO as Fidelity implied.

 

 

[Peter Gulia]

BenefitsLink mavens, the third paragraph paterinick's originating query suggests some possibility that the plan might be a governmental plan.  "ASRS" might refer to the Arizona State Retirement System.  And the "got switched" might refer to Arizona's or another State's change from a defined-benefit pension plan to an Optional Retirement Plan for a State university's faculty and administrative employees.

For a governmental plan, it might be true that an employing unit's human-resources person lacks authority.

Likewise, it's not uncommon for a governmental plan to contract for an investment custodian or recordkeeper to perform almost all plan-administrator functions.

[david rigby]

Just a hunch, but it's possible the original poster might be confused by some of these responses.  Here's my summary (which may not be complete):

• In general, most plans permit a payment only upon limited circumstances: severance of employment, death, disability, etc. (The plan is not a piggy-bank; it's designed for long-term retirement needs, not short-term cash-flow.)
• Some plans offer the ability to make a loan to a still-employed participant, generally repaid thru payroll deductions.  No plan is required to offer this feature.  As stated above, it's trading one debt for another, so may not address your larger problem.
• Some plans offer the ability to take an in-service payment if you are still employed beyond a specific age (such as 65).  It's not required.
• A QDRO ("qualified domestic relations order") might create the right to an "early" payment, but that may not be productive since it is for the purpose of fulfilling a domestic relations order.  Most DRO's are related to divorce/separation, and a few are related to child support.  Generally, a QDRO will create the ability for someone else to get a payment (ie, spouse/ex-spouse, child's guardian, etc.), rather than a payment to you.  It's also possible that the plan itself could limit the timing under a QDRO (for example, not prior to the time the participant could get a benefit); if so, the QDRO is not permitted to alter this plan provision.
• If this is a defined benefit plan, the plan may permit a payment only in the form of an annuity (ie, monthly payments), and will not permit any type of lump sum, even with a QDRO.
• Declaring bankruptcy will (probably) not create any mechanism to speed up any payment to you. 
• If this is a defined contribution plan, as stated above, the plan may have a provision that permits hardship distribution. There are tax consequences.  Read your summary plan description.

[Lou S.]

FGC, good points and ones I had not considered. May answers and likely others were based on this being a 401(k) plan as that this the subforum it is in, but that could be a faulty assumption on my part.

[paterinick]

Yea,  sorry this was posted under 401k forum. 

David and Peter are correct in their feedback and it's great to hear the realistic options.

The HARDSHIP distribution seems the best choice but the TAXES paid out are crazy and not even sure that is possible with this plan through Fidelity.

Thanks for the 101 in retirement fun!