QDRO QDRO Tax Implications & Benefits Planning

Question 1

When an alternate payee receives a distribution from a qualified plan pursuant to a QDRO, who is responsible for paying the federal income tax on that distribution?

Accepted Answer

The alternate payee

Answer

The participant

Answer

Both parties equally

Answer

The plan administrator

Question 2

An alternate payee who receives a QDRO distribution directly from a qualified plan (without rolling it over) and is under age 59½ is:

Accepted Answer

Exempt from the 10% early withdrawal penalty

Answer

Subject to the 10% early withdrawal penalty

Answer

Taxed at a flat 20% rate

Answer

Required to defer the distribution until age 59½

Question 3

If an alternate payee receives a QDRO distribution and chooses to roll it over to a traditional IRA, the tax consequence at the time of the rollover is:

Accepted Answer

No immediate tax; taxes are deferred until IRA withdrawals are made

Answer

Immediate taxation on the full rollover amount

Answer

A 20% mandatory withholding that cannot be waived

Answer

A one-time flat tax assessed by the plan administrator

Question 4

When a plan makes a direct distribution to an alternate payee under a QDRO, the mandatory federal income tax withholding rate applied to eligible rollover distributions is:

Accepted Answer

20%

Answer

10%

Answer

15%

Answer

30%

Question 5

For a participant in a qualified plan, the transfer of funds to an alternate payee pursuant to a QDRO is treated for tax purposes as:

Accepted Answer

A non-taxable transfer with no income recognized by the participant at the time of transfer

Answer

Ordinary income to the participant in the year the QDRO is executed

Answer

A capital gain to the participant

Answer

A deductible contribution from the participant's gross income

Question 6

An alternate payee who rolls a QDRO distribution into a Roth IRA (rather than a traditional IRA) will:

Accepted Answer

Owe income taxes on the converted amount in the year of the rollover

Answer

Owe no taxes at any point on the rolled-over funds

Answer

Be subject to a 10% penalty for the conversion

Answer

Receive a tax deduction equal to the rollover amount