Qualified Domestic Relations Order

During divorce, retirement and pension funds, such as those in 401(k) plans, may need to be divided. Early withdrawals from these accounts may incur penalties unless a Qualified Domestic Relations Order (QDRO) is obtained.* The QDRO directs a retirement fund’s administrator to pay a specific amount to a former spouse or child. The former spouse may defer tax on the payments by rolling them into an IRA within 60 days of receipt. Payments made to a child are taxed to the plan participant.

* The exception to the early withdrawal penalty only applies to 401(k)s and other qualified plans. An early withdrawal from an IRA would still be subject to penalty.