Yes. A Plan is prohibited from paying a non-participant spouse unless it has received a court certified QDRO.
The plan may not permit a distribution to the participant. If the plan does permit a distribution, the participant may be subject to a premature distribution penalty and will be subject to federal and state income tax.
Yes, a distribution paid to the alternate payee will be subject to federal and state income tax. Alternatively, If the alternate payee elects a direct rollover to an IRA or another qualified plan, it is not taxable until the distribution is actually taken from the IRA or qualified plan.
A 10% premature distribution penalty applies to distributions taken prior to age 59-1/2. This penalty does not apply to an alternate payee who receives the distribution via a QDRO.
Yes, delay can result in a loss of benefits if the participant remarries, dies or commences benefits before the QDRO is filed with the plan.
So long as the QDRO accurately reflects the terms of the parties Settlement Agreement, the Court may approve and sign the QDRO without the Participant’s signature. The Plan is required to process the QDRO so long as it complies with the terms of the Plan and has been signed and approved by the Court.
A shared interest payment to an alternate payee is a payment over the participant’s life and the payment ceases at the death of the participant, unless the benefit is paid as joint and survivor annuity or, with a federal or military plan, there is a provision for a former spouse survivor annuity. Governmental plans, including military plans, require a shared interest payment. A shared interest payment is paid to the Alternate Payee when the Participant commences benefit payments.
A separate interest payment to an alternate payee is a payment over the alternate payee’s life and is guaranteed to be paid for his/her lifetime. A separate interest payment may be paid to the Alternate Payee prior to the Participant’s commencement of benefits, so long as the Participant has met the earliest retirement age requirements under the terms of the Plan.
Most courts will accept a Stipulation, Post Judgment stating that the intent was to provide for these provisions in the Settlement Agreement. The Stipulation must be signed by both parties and filed with the QDRO.