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What are the tax consequences if the Alternate Payee takes a distribution via QDRO?

Submitted by on Tuesday, 27 December 2016 09:28

Any distributions to the Alternate Payee directly from the retirement plan will be taxed to the Alternate Payee. A QDRO cannot require that the taxes be paid by the Participant. However, if a direct distribution is taken via QDRO, the Alternate Payee can avoid paying the 10% federal penalty for early distribution. Alternatively, the Alternate Payee may have a distribution rolled over to their own retirement plan or IRA if the plan permits. In addition, if you receive an early distribution and deposit in your own qualified plan within 60 days you may be able to avoid the tax and penalties. Always check with your own tax advisor for specific circumstances.

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