A QDRO is required to avoid paying taxes and penalties for early withdrawal and to accurately divide a retirement plan. A QDRO is needed to divide an account-based retirement plan, such as a 401(k), 403(b), 457(b) or other deferred compensation plan or profit sharing plan so that the Plan Participant does not have to pay taxes on the amount being transferred to a spouse or former spouse of the Plan Participant. The transferee is referred to in a QDRO as the “Alternate Payee”. Use of a QDRO also avoids the 10% early withdrawal penalty. Under a QDRO, the Plan Administrator will follow the instructions to make a payment to the Alternate Payee. If a Plan Participant simply withdraws money from their account-based plan to pay a former spouse without using a QDRO, then the Plan Participant would be responsible for the 10% early withdrawal penalty and all taxes on the amount withdrawn. Attorney Ehrmann will ensure your QDRO or DRO is written correctly to comport with federal tax laws
