Traditional vs. Roth Accounts
Many 401(k) plans now offer both traditional (pre-tax) and Roth (post-tax) subaccounts. A thoughtful QDRO must address which type of account the alternate payee is receiving. If the Morgans Wonderland Management Company 401(k) Profit Sharing Plan and Trust offers both, this distinction matters hugely for taxes and rollover planning.
- If funds are coming from the traditional account, the alternate payee will owe income taxes unless rolled into another qualified retirement account.
- If funds are from a Roth 401(k) and rolled into a Roth IRA, distributions may eventually be tax-free.
A blanket transfer without accounting for these differences can result in unwanted tax consequences.

