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Immediate Ca$h To The Alternate Payee From A QDRO

Can an Alternate Payee ("AP") receive an immediate cash distribution from a Defined Contribution Pension?

Generally, an immediate Cash distribution can be made to an AP. However, a mandatory minimim tax withholding (NOT A PENALTY) will be made. For example: If an AP is supposted to get $10,000.00 from a 401(k) plan and wants cash in his/her pocket today, how much will the plan send to the AP? Answer: $8,000.00 (20% tax withholding sent directly to IRS). Please note if the AP has an effective tax rate greater than 20% additional taxes may be due. Conversly, if the AP has a lower than 20% effective tax rate a IRS refund may be due.

Categories: QDRO