Divorce and the Duggan Bertsch 401(k) Plan: Understanding Your QDRO Options

Most 401(k) plans, including the Duggan Bertsch 401(k) Plan, include both employee salary deferrals and matching or profit-sharing contributions from the employer. A proper QDRO should clearly state whether the alternate payee (typically the former spouse) is receiving a share of:

• Just the employee’s contributions
• Employer contributions as well
• Account earnings and losses on both types of contributions

Make sure the draft QDRO spells out exactly what’s included. Otherwise, benefits could be under-divided—or worse, over-divided and rejected by the plan administrator.

Employer contributions are often subject to vesting schedules. That means the employee must stay with Duggan bertsch, LLC for a certain number of years before those employer-funded dollars fully “belong” to them.

If the employee isn’t fully vested at the time of divorce, the QDRO must account for this. The alternate payee can only receive a share of the vested portion. Any unvested funds are not available and may be forfeited if the employee leaves the company prematurely. Plans do not hold alternate payee assets in suspended animation waiting for above-vesting events—they divide based on facts as of the determined division date (usually the date of divorce).

If the participant spouse has an outstanding 401(k) loan, it affects the total account balance. The QDRO must be clear about whether the loan is:

• Considered part of the divisible balance, or
• Excluded, leaving the alternate payee to receive only the liquid portion

This is a hot issue in many divorces. For example, if a participant took out a large loan for marital expenses, should that entire loan be debited from just their portion? These questions must be decided before QDRO drafting begins and then built into the language of the order.

Many modern 401(k) plans include both pre-tax and Roth after-tax contributions. The Duggan Bertsch 401(k) Plan may include both types, so your QDRO should indicate how to divide each:

• Roth balances must be handled separately due to their tax-exempt status upon qualified withdrawal
• Traditional balances incur taxes when withdrawn, unless rolled into another qualified plan

The QDRO should direct that Roth amounts be rolled over to a Roth IRA in the alternate payee’s name, and traditional funds to a traditional IRA or plan. Mixing the two in a lump-sum transfer could create unintended tax liabilities.

Start with a request to Duggan bertsch, LLC or the plan administrator for the Summary Plan Description, recent account statements, loan disclosures, and plan-specific QDRO guidelines (if available). Many plans have internal pre-approval review procedures you can take advantage of—if you know how to follow them.

Incorrect dates, ambiguous percentage calculations, failure to address loan treatment, and missing plan information are some of the top reasons QDROs get rejected. We’ve listed more common QDRO mistakes here:Top QDRO Mistakes.

Many law firms will draft a QDRO and hand it off to you without any follow-through. At PeacockQDROs, we’ve completed many QDROs from start to finish. That means we don’t just draft the order and leave you to figure out the rest. We handle the drafting, preapproval (if applicable), court filing, submission, and follow-up with the plan administrator. That’s what sets us apart from firms that only prepare the document and hand it off to you.

We maintain near-perfect reviews and pride ourselves on a track record of doing things the right way. Learn more about our full-service approach here:PeacockQDROs Services.