IRA rollover into a 401k in anticipation of subsequent QDRO
Husband & wife (each 50 yrs old) are getting divorced and husband has approx. $3M in his traditional IRA (rollover from former employer). He also has a small 401k with $50,000 in it.
The wife is going to need $200k-$300k after the divorce and wishes to find a way to benefit from a traditional QDRO break on the 10% penalty.
Question: Assuming his 401k allows for the rollover of IRA funds, could he, prior to the divorce, roll over $300,000 from the IRA into the 401k for no reason other than to then be eligible to have a QDRO distribution to wife of $300,000 from the 401k and she thereby avoids the 10% penalty?
I thought I remember something out there that prevented this technique but I can’t seem to find it. Almost seems just too clever, but who knows.
Mark S.
Permalink Submitted by Alan - IRA critic on Thu, 2018-11-08 02:09
Am not aware of any restrictions on doing this. There are also no restrictions on QDRO distributions being eligible for the penalty waiver. There are many tax advantages available by effectively using all the expanded plan portability options of the last 15 years. Of course, the 401k plan must allow for accepting IRA rollovers.