Broken 401KAlthough it seems unfair, your personal 401(k) retirement plan is considered marital property and, as such, is subject to the same rules as other marital possessions in a divorce.

A recent article by Jerry Shaw on offered advice on how to ensure this asset is shared equitably between both parties.


Once you’re sure about your divorce, talk with your plan administrator as soon as possible. It’s important that both you and your attorney are familiar with your plan’s particular requirements, as asset protection in divorce is often a key point of negotiations.

Shaw states, “The plan may have requirements or options to use when dividing the plan with your spouse. Some plans allow disbursement as soon as the divorce is finalized, but other plans may not allow distributions of any kind until retirement age.”


Understanding your alternatives will help you negotiate a property division outcome that works for both parties. Options for dividing a 401(k) plan can vary and include:

  • Simply splitting the assets equally

  • You keep your plan and replace your spouse’s portion of its value with other marital assets

  • Liquidating only a portion of the assets

  • Rolling over a set amount of the asset into your spouse’s retirement plan

Per IRS regulations, dividing the assets of a 401(k) through a cash payment is a one-time option. “Any additional payouts decided later on would be subject to a 10 percent penalty on the withdrawal. Any distribution from the plan before age 59 and a half is also considered an early withdrawal,” says Shaw.

In addition, any money distributed before retirement age requires an employer to withhold a pre-payment tax of 20 percent on the distribution amount.


A QDRO, or Qualified Domestic Relations Order, tells your 401(k) plan administrator how to divide up the money according to federal regulations. If needed, your plan administrator will have “model copies” of completed QDRO documents for you to follow.

Both your plan administrator and the presiding judge must sign the completed QDRO, which should then be shared with your attorney and your spouse’s attorney so they’re familiar with your plan details for negotiations on splitting this asset.

Ensure that the QDRO is filed, approved and signed as soon as possible. If the party with the 401(k) plan dies or retires before this happens, the other party could potentially lose any funds due to him or her.

Using family mediation or a collaborative divorce process often results in a win-win for both parties around property division in a divorce, and I am well-experienced in these areas. Contact me to learn how I can help with your situation.


Erin_Birt_37033-199x300Illinois attorney Erin Birt is a skilled legal professional with over ten years of experience in trial and divorce law serving clients in many DuPage County cities including Wheaton, Glen Ellyn, Naperville, Warrenville and Winfield.

She opened the Law Firm of Erin Birt, P.C. in 2010 to offer her clients alternative divorce resolution services, specialized collaborative divorce options and family law expertise. She and her expert team continually develop creative outcomes such as divorce mediation and family law mediation that work for all parties involved, particularly children.

Ms. Birt holds a J.D. from DePaul College of Law and is a member of the Collaborative Practice Professionals of Illinois, the Collaborative Law Institute of Illinois, the International Academy of Collaborative Professionals and the DuPage County Bar Association. She is a past board member and presenter for the Mediation Council of Illinois.