I represent a client who is the alternate payee on a QDRO. Can she cash this check without being subject to the 10% early distribution penalty or is this a distribution exempt under 72(t)?

A distribution made because of a QDRO is taxable to the alternate payee but NOT subject to the 10% premature distribution tax. A distribution to a spouse or former spouse also is eligible to be rolled over to an IRA or other qualified retirement plan.

But once the pension funds are rolled over into an IRA, they become subject to the 10% early distribution penalty (if the alternate payee is younger than age 59-1/2 and is not disabled).

Thanks for the info. I thought my client would be exempt from that 10% penalty but just wanted to get some additional insight.

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