A portion of an IRA (Individual Retirement Account) can be transferred without tax penalty into an IRA Account for the alternate payee, if the alternate payee is the spouse or former spouse and the transfer is pursuant to a divorce. The IRA investment firm needs either a letter or a QDRO (Qualified Domestic Relations Order) to make this transfer occur.
Check first with the investment company who manages the IRA (the plan) to ascertain requirements for a transfer, and if the plan requires a QDRO. Some plans will allow an IRA to IRA transfer pursuant to a divorce without a QDRO. If a QDRO is required, you may wish to retain a qualified actuary who specializes in pensions and QDROs in divorce to draft a QDRO for the transfer. The actuary will draft the QDRO in accordance with the distribution details of the transfer from your Property or Marital Settlement Agreement or Divorce Judgment or Decree. He drafts the QDRO in accordance with plan compliancy and Federal guidelines provided for in Internal Revenue Code Section 414 (p). He properly addresses vital issues including death of either of the parties, interest plus timing, taxation and transfer details to create a secure QDRO with airtight language that protects the clients and ensures the funds are transferred properly.
After the QDRO has been drafted, the actuary will submit it to the plan QDRO Administrator for review. He will interact directly with the plan for you and ultimately deliver a pre-approved QDRO ready for Court signature to your attorney. The Court-signed QDRO is now ready for you to forward to the plan for transfer activation.
Many people are surprised to learn that this process can sometimes be lengthy. Your actuary takes just two weeks to draft the QDRO and send it to the plan. However, the plan has a comprehensive review process that may take anywhere from another two weeks to several months, depending on revisions and resubmissions that may be required or depending on the detail of the plan's review policies and procedures. For this reason, you may wish to consider starting the QDRO process as soon as the settlement details are finalized.
Mark K. Altschuler, M.S., Actuary, is President of Pension Analysis Consultants Inc., of Elkins Park, PA. and has prepared over twelve thousand marital pension valuations and draft QDRO's for counsel. He is well-versed in the complex arena of equitable distribution in marital dissolution matters. Mr. Altschuler, has over fifteen years experience as an actuary in the pension and property/casualty areas, and is an affiliated member of the American Society of Pension Professionals and Actuaries (ASPPA).
Certified Divorce Financial Analyst
Business Valuators / CPAs