Qualified Domestic Relations Order (QDRO)
The issuance of a qualified domestic relations order (QDRO) can impact pension or annuity payments in some cases.
A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child or other dependent. The order has to contain certain specific information like the amount of the participant’s benefits to be paid to each alternate payee.
Spouse or Former Spouse
If a spouse or former spouse receives retirement benefits from a participant’s plan under a QDRO, the former spouse (also referred to as the alternate payee) must report the payments just as though he/she were the plan participant. The early distribution penalty does not apply, regardless of the alternate payee’s age. The taxability is computed by allocating the spouse/former spouse a share of the investment in the contract and figuring the taxable portion accordingly (see below for computing taxability when there is investment in the contract).
Child or Dependent
If a child or dependent receives a distribution under a QDRO, the amount is taxed to the plan participant.