401k Rules after Divorce
What are the options for funds in a 401k after a divorce for the spouse? The husband is still employed and both of them are under 591/2. Can she take her portion out of the 401k and roll it into an IRA of her own or does it have to remain with the employer’s custodian under her name until he/she turns 59 1/2 or he retires?
Permalink Submitted by Jan Haven on Fri, 2012-05-18 21:19
The divorce decree will state the amount the ex-spouse is to receive from the 401(K). With this proof, that amount can be transferred to an IRA of her own.
Permalink Submitted by Alan Spross on Fri, 2012-05-18 23:51
[quote=”[email protected]“]What are the options for funds in a 401k after a divorce for the spouse? The husband is still employed and both of them are under 591/2. Can she take her portion out of the 401k and roll it into an IRA of her own or does it have to remain with the employer’s custodian under her name until he/she turns 59 1/2 or he retires?[/quote]
The non participant spouse seeking a divorce will have to secure a QDRO to get access to her share of the 401k. But a QDRO cannot require a plan distribution to the spouse (alternate payee) that would not be allowed to the employee, although the plan might agree to such a distribution. If the alternate payee receives distributions directly from the plan, there is no early withdrawal penalty under the QDRO exception. But if the distribution is rolled over to an IRA for the alternate payee, the penalty will apply for IRA distributions until she reaches 59.5.