Division of 401(k) Plans

401(k) plans are the most common retirement plans offered by private employers, having surpassed the traditional defined benefit plans long ago. Just like with an IRA, a Colorado divorce court can divide a 401(k) between the spouses, again without regard for which spouse was the employee and which was not. And it is also not a taxable event, nor one for which an early withdrawal penalty applies.

Unlike an IRA, however, the division of a 401(k) requires a separate court order, called a Qualified Domestic Relations Order, or QDRO. Samples are usually available from the plan administrator upon request, however great care should be taken when completing them - you not only have to comply with the plan requirements, but also with the specific provisions of the Colorado divorce decree.

Once divided, the non-employee spouse owns his/her interest in the 401(k), which then grows separately from the employee's portion. However, while the employee spouse can continue investing in his/her portion, the non-employee spouse former spouse may have to rollover the 401(k) into a different plan which allows investments.