As Seen in Philadelphia Business Journal
A QDRO is a court order for a retirement plan to pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a participant which is often a component of a divorce settlement. As part of an equitable distribution, the court determines what amount of the qualified retirement plan’s balance is to be presented to the non-owning spouse which allows the non-owning spouse to direct the retirement plan custodian to distribute the funds in a specified amount. The owning spouse will not be taxed or penalized on the distribution. If the non-owning spouse chooses to roll the distribution into an IRA, there would be no tax or penalty on that distribution to them either. If the non-owning spouse chooses to use the funds in any fashion other than rolling over into another qualified plan or IRA, there will be tax on the distribution at their ordinary tax rate, but no penalty. A withdrawal from QDRO is an exception to the early distribution 10% penalty. Contact us for more information.