QUALIFIED DOMESTIC RELATIONS ORDER (QDRO):
01.Core Concepts
CHILD AS PAYEE: EXAMPLE • Roger and Shirley divorce after several years of marriage. They have one 15-year-old child, Mabel, and Roger is the custodial parent. Shirley has a qualified retirement plan through her current employer with an account balance of $300,000. • The plan allows for a lump-sum distribution of a percentage of the account balance. • Roger and Shirley’s QDRO states that Mabel is to receive 25% of the account balance. Roger, as custodial parent, will receive a lump-sum distribution of $75,000 for the benefit of Mabel (20% withholding). • Mabel is not subject to ordinary income taxation or a 10% early withdrawal penalty as a child-payee of the participant. • Shirley, as the participant, is subject to ordinary income taxation on the distribution to Mabel.