401K QDRO

[jonjon035]

I am to have a QDRO executed in regards to my 401k plan. Can anyone answer what the guidelines are in regards to loans taken out prior to order being entered and after? I took out a loan, while still married, 3 months prior to the judgment being entered and would like to know if that can pose an issue for me.

 

[adjusterjack]

It will, but not an unsurmountable one.

There are two ways to do a QDRO. By amount and by percentage.

My guess is that your spouse will want to determine the value of the account before the loan and divide that value in two.

Example: $100,000 in account before the loan, $20,000 loan leaves $80,000. She gets $40,000 for her account, you get $40,000 for your account and still have to pay off the loan.

When served with a QDRO the custodian of the 401(k) will divide the accounts into two accounts, your original account and a separate 401(k) account in your spouse's name which she can then roll over into her own IRA.

Understand that a QDRO is a court order so you have to be very specific in how you want it handled.

 

[jonjon035]

Thank you for the response.

So let me make sure I understand. Any loans before the actual dissolution date are loans that WE took out as a married couple for the household. And the amount that I need to be concerned with is the amount in the account at the date of dissolution? A bit more specific to my situation...There was approximately 15k in the account on June 1 2015, I took out a loan for 13k lets say that same day leaving 2k. The QDRO states that there was approx. $5500 in the account as of July 15 2015, which is incorrect but nevertheless, and the order was entered 9/25/2015. Am I correct in asserting that the remaining 2k is the amount I should be focused on distributing to her? Well half of that so $1000?

 

[LdiJ]

Thank you for the response.

So let me make sure I understand. Any loans before the actual dissolution date are loans that WE took out as a married couple for the household. And the amount that I need to be concerned with is the amount in the account at the date of dissolution? A bit more specific to my situation...There was approximately 15k in the account on June 1 2015, I took out a loan for 13k lets say that same day leaving 2k. The QDRO states that there was approx. $5500 in the account as of July 15 2015, which is incorrect but nevertheless, and the order was entered 9/25/2015. Am I correct in asserting that the remaining 2k is the amount I should be focused on distributing to her? Well half of that so $1000?

I do not agree with adjusterjack. I think its going to depend on how the loan was used. However, if the QDRO states that there was 5500.00 in the account as of July 15, 2015 then you owe her half of that. The QDRO rules.

 

[HRZ]

There are multiple other posts if OP googles as to debt and QDROS ...but for now if the order reads one half of $5500 you best plan of using that number PLUS any appreciation or loss. ...a new long debate over status of the $13 k loan you took out on that day invites recomputation of the amount to be 15K plus growth

 

[adjusterjack]

I think its going to depend on how the loan was used.

I agree there. I actually had that thought in my head but just wanted to simplify the example.

The QDRO states that there was approx. $5500 in the account as of July 15 2015, which is incorrect but nevertheless, and the order was entered 9/25/2015. Am I correct in asserting that the remaining 2k is the amount I should be focused on distributing to her? Well half of that so $1000?

No. But why is this an issue now (almost 3 years later)? The accounts should have been split in 2015 and a non-employee account created for her. You should not be distributing anything to her. In fact, if the QDRO wasn't properly complied with and you just withdraw cash now to pay her, you will pay taxes (and maybe the penalty) for that distribution.

As for the amount you are stuck with dividing the $5500. If that was wrong you should have had the QDRO re-written before it became a court order.

Somebody appears to have messed this up.