How long to get 401K proceeds from divorce settlement? (1 Viewer)

[urbanhack]

Question for those who've been divorced or know details of someone who has.   My sister has gone through a really ####ty divorce the past 3 years.   Stay at home mom with 3 boys.  She got her yoga certification and taught some during those years, but never earned real money.   So they finally agreed on a settlement where she's getting a huge payout up front in instead of monthly maintenance. (Child support is separate).  It's all coming from his company 401K where 60% of the funds are employer matched.  Here's my question.

The divorce was legally completed back in June.  Whatever paper needed to be filed, got filed, etc.   But as of today, she still doesn't have the money from the 401K.   Is this way out line?  Supposedly the company was putting it through a special audit since 100% of the 401K was being depleted and it was going to a non-employee.  I don't get it and am looking for some insights.

 

[johnnycakes]

IIRC, when I got divorced, settlement of the 401K was the last step in the property settlement process.  But it went pretty quickly.  the judge just had to sign off on the QDRO and then the funds got disbursed.  All in all, only took a week or so.  

 

[GroveDiesel]

Do you know if the funds were in an individual account versus a pooled account?

If it's an individual account, is the payout a specific dollar amount, or is it a specific percentage?

If it's a pooled account, how often is th account evaluated?

Individual accounts should be paid out fairly quickly, but pooled accounts can take some time to value the total assets as of a specific date and pay out the account's proportional amount as of that date.

 

[Moe.]

Who is the ex-spouse's employer? Do you know who handles their plan?

 

[Moe.]

In general though it can be quite the process, depending on the plan, who they use for record-keeping, etc. It's hard to say what's normal without more info. 

 

[urbanhack]

Who is the ex-spouse's employer? Do you know who handles their plan?

Toyota and Fidelity (I believe)

 

[Moe.]

I have a hard time believing there is any sort of special audit needed for a plan/firm that large, QDROs are fairly commonplace and not all that complicated.

They aren't all handled the same, but assuming all of the necessary court docs were provided to Fidelity in June it should be done by now. She probably knows this by now but they don't just cut her a check, they will typically create an account under her name within the plan, and then she'll have to contact Fidelity to request a distribution.

 

[The Commish]

Toyota and Fidelity (I believe)

Fidelity is more conservative than us.  It might take a while.  

 

[Christo]

I have a hard time believing there is any sort of special audit needed for a plan/firm that large, QDROs are fairly commonplace and not all that complicated.

They aren't all handled the same, but assuming all of the necessary court docs were provided to Fidelity in June it should be done by now. She probably knows this by now but they don't just cut her a check, they will typically create an account under her name within the plan, and then she'll have to contact Fidelity to request a distribution.

Less taxes, of course.

 

[urbanhack]

I have a hard time believing there is any sort of special audit needed for a plan/firm that large, QDROs are fairly commonplace and not all that complicated.

They aren't all handled the same, but assuming all of the necessary court docs were provided to Fidelity in June it should be done by now. She probably knows this by now but they don't just cut her a check, they will typically create an account under her name within the plan, and then she'll have to contact Fidelity to request a distribution.

Yes...she knows about the creation of the accounts, etc.   Thanks.

I think her attorney is an idiot, but I've never met or spoken to him.

 

[Moe.]

I'd tell her to call Fidelity directly and see where they are at in the process. Most recordkeeers have a procedure in place to discuss that stuff with QDRO recipients even if the account hasn't been segregated yet. 

 

[The Commish]

If it's anything like us, it will get moved/split into a retirement account in her name.  However, for that to happen you'll need a "qualified domestic relations order" from the court.  That probably won't happen until the divorce is final.  If she decides to withdraw the money instead of keeping the account, she will be subject to the rules of the plan the account is in when it comes to taxes/penalties etc.

ETA:  Nevermind...looks like Moe covered that  

 

[Mrs. Rannous]

I'd tell her to call Fidelity directly and see where they are at in the process. Most recordkeeers have a procedure in place to discuss that stuff with QDRO recipients even if the account hasn't been segregated yet. 

Yep.  Call Fidelity.