medium · Certified Financial Planner Professional Conduct
A distribution is made to an 'alternate payee' under a Qualified Domestic Relations Order (QDRO) from a spouse's ERISA-qualified 401(k) plan.
Which tax consequence is unique to this transaction?
- The participant spouse retains the tax liability for the distribution even if the funds are paid to the alternate payee.
- The distribution is entirely tax-free if rolled over to a Roth IRA within 30 days.
- The same penalty-free treatment applies to distributions from an IRA divided incident to divorce.
- The distribution is exempt from the 10% early withdrawal penalty, even if the payee is under age 59.5.
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