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  1. #1
    Join Date
    Oct 2014
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    Default QDRO and Pension Buyout

    My question involves a marriage in the state of: FLORIDA

    I was divorced several years ago and awarded part of my ex-husband’s vested pension in Company A. This was a traditional defined benefit pension, with payouts expected eight years from now.

    After the divorce my ex went to Company B. He recently accepted an unexpected cash buyout offer from Company A, and the entire amount was distributed to him. I was not in the loop because my attorney never submitted the signed QDRO to the plan administrator.

    The QDRO states: “While it is anticipated the Plan administrator will pay directly to Alternate Payee (me) the benefit awarded, Participant (ex-husband) is designated a constructive trustee to the extent Participant receives any retirement benefits under the Plan that are due to Alternate Payee (me) but paid to Participant. Participant is Ordered to pay the benefit above directly to Alternate Payee…”. QDRO also states I am ORDERED to report any retirement payments I receive on my income tax return.

    While my ex intends to give me my share, exactly how much is the question.

    Problem is the tax consequences. Since my portion of the money is in his possession, I can no longer take advantage of directly rolling it from the plan into my own IRA. The monies were rolled into his IRA. Which means any money he withdraws now for me is subject to a 20% automatic withholding, and when he files his taxes an added 10% early withdrawal penalty, and another 10% because of his income bracket.

    So if my share is $60K, does he legally only owe me whatever is left after his taxes on that, which may be roughly $35,000?

    Would that leave the money free and clear for me, or is it subject to taxation again as my income?

    Thanks in advance for any assistance

  2. #2
    Join Date
    Sep 2011
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    Default Re: Qdro and Pension Buyout

    Were all the monies rolled into another tax deferred retirement account or only 50% of them and he held the remaining 50% paying tax on the distribution or having tax due on the distribution? If he put all of the money into the new plan, you should be able to present the QDRO for a distribution of your half in one year and then do a rollover into your IRA within 60 days.

  3. #3
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: QDRO and Pension Buyout

    Quote Quoting qdro
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    My question involves a marriage in the state of: FLORIDA

    I was divorced several years ago and awarded part of my ex-husband’s vested pension in Company A. This was a traditional defined benefit pension, with payouts expected eight years from now.

    After the divorce my ex went to Company B. He recently accepted an unexpected cash buyout offer from Company A, and the entire amount was distributed to him. I was not in the loop because my attorney never submitted the signed QDRO to the plan administrator.

    The QDRO states: “While it is anticipated the Plan administrator will pay directly to Alternate Payee (me) the benefit awarded, Participant (ex-husband) is designated a constructive trustee to the extent Participant receives any retirement benefits under the Plan that are due to Alternate Payee (me) but paid to Participant. Participant is Ordered to pay the benefit above directly to Alternate Payee…”. QDRO also states I am ORDERED to report any retirement payments I receive on my income tax return.

    While my ex intends to give me my share, exactly how much is the question.

    Problem is the tax consequences. Since my portion of the money is in his possession, I can no longer take advantage of directly rolling it from the plan into my own IRA. The monies were rolled into his IRA. Which means any money he withdraws now for me is subject to a 20% automatic withholding, and when he files his taxes an added 10% early withdrawal penalty, and another 10% because of his income bracket.

    So if my share is $60K, does he legally only owe me whatever is left after his taxes on that, which may be roughly $35,000?

    Would that leave the money free and clear for me, or is it subject to taxation again as my income?

    Thanks in advance for any assistance
    If your ex cooperates it still should be possible to submit a QDRO to his current IRA plan administrator so that you can roll your share of the money into your own IRA and avoid the entire issue of tax on your share.

    However, even if he gets stupid and doesn't cooperate, the 10% penalty is excluding when the withdrawal is due to a property division in a divorce.

  4. #4
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    Default Re: QDRO and Pension Buyout

    Don't forget the IRS one year rule. Withdrawl before then to comply with the QDRO will make it taxable. Once the year passes, she should be able to take the distribution and will have 60 days to roll it over into another plan of her own tax free.



    Quote Quoting llworking
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    If your ex cooperates it still should be possible to submit a QDRO to his current IRA plan administrator so that you can roll your share of the money into your own IRA and avoid the entire issue of tax on your share.

    However, even if he gets stupid and doesn't cooperate, the 10% penalty is excluding when the withdrawal is due to a property division in a divorce.

  5. #5
    Join Date
    Oct 2014
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    3

    Default Re: QDRO and Pension Buyout

    Quote Quoting Disagreeable
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    Don't forget the IRS one year rule. Withdrawl before then to comply with the QDRO will make it taxable. Once the year passes, she should be able to take the distribution and will have 60 days to roll it over into another plan of her own tax free.
    Thanks. Can you please elaborate a little on this one year rule and how it may apply to my situation?

  6. #6
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    Default Re: QDRO and Pension Buyout

    Rather than give a limited explanation as I have typing problems, I will link you to the IRS rules. As I understand it, him withdrawing your money as trustee will subject him to taxes and he will then reduce the amount you get by the taxes he was required to paid. Had he given you the money as Trustee before rolling it over, you should have been fine. Now because it must sit for a year, he should also owe the one year appreciation of your half of the money in the Trustee transfer.

    http://www.irs.gov/Retirement-Plans/...-Per-Year-Rule

  7. #7
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    Oct 2006
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    16,474

    Default Re: QDRO and Pension Buyout

    Quote Quoting Disagreeable
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    Don't forget the IRS one year rule. Withdrawl before then to comply with the QDRO will make it taxable. Once the year passes, she should be able to take the distribution and will have 60 days to roll it over into another plan of her own tax free.
    That doesn't apply here Dis...because there would be a QDRO.

  8. #8
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    Default Re: QDRO and Pension Buyout

    I carefully considered the language and it said trustee to trustee. It did not indicate anything subject to a QDRO though she could theoretically be her own trustee.

    Quote Quoting llworking
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    That doesn't apply here Dis...because there would be a QDRO.

  9. #9
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    Oct 2006
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    Default Re: QDRO and Pension Buyout

    Quote Quoting Disagreeable
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    I carefully considered the language and it said trustee to trustee. It did not indicate anything subject to a QDRO though she could theoretically be her own trustee.
    I am telling the truth Dis. The QDRO allows things to happen that normally cannot happen. The feds have no interest in stopping or delaying a division of assets in a divorce situation. The husband would be prohibited from rolling over his share again for another year, but the wife would not have the same restriction, as the only way to get the money into her name is to roll it into an IRA in her name.

  10. #10
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    Default Re: QDRO and Pension Buyout

    I defer to your advice and experience if you state you are certain. You do it professionally daily, I only do my own now.

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