If a 50 year old individual has begun taking substantially equal payments from a plan and later divorces, what is the effect on the substantially equal payments. The plan balance will likely be split between the spouses.

* Is there any way to provide spouse with a pro-rata obligation to pay their share of the substantially equal payment?
* Will the IRS allow for a reduction in the amount of the substantially equal payment (I don't think so)?
* Or is there any other way to avoid having half the balance required to pay the entire distribution amount?

There have been two private rulings issued in the last few years regarding this topic. In the first one, the IRA was split 50-50 and the couple agreed to continue taking the payments 50-50. The IRS ruled that this was fine and no 10% penalty would be imposed.

The second ruling was an IRA split that wasn't exactly 50-50 and there was no agreement amonst the spouses. The husband took out his prorata share of the substantially equal periodic payment. The IRS imposed the penalty because there was no requirement that the spouse pick up the remainder of the payment.

Mary Kay, Could you please provide a citation to the Private Letter Rulings for the 50-50 agreed split? Thanks.

Check LTR 9729044. Good luck.

I tried to find the PLR you provided but could not locate the reference number via the IRS or other sources. Could you check to see if the reference is correct? Thank you!!

Take a look at PLR 200050046 issued last week. The IRS allowed for a reduction in the payout for the IRA owner, without requiring the receiving spouse to continue payments.

The original post used the term "plan". All of the other posts are concerned with IRAs. My hunch is that the IRS would find a difference between an IRA and a plan.

If this is an issue of distributions from a qualified plan, then only a QDRO is relevant. Even then, it seems questionable whether a judge has standing to make any change in a benefit after distribution has commenced.

Sorry. The cite should have been to 9739044.

If you can't find it, email me and I'll forward it.