Which of the following is an implication of a QDRO?

A Qualified Domestic Relations Order (QDRO) is a legal order that recognizes the right of an alternate payee, such as a spouse or former spouse, to receive a portion of retirement plan benefits. One of the key implications of a QDRO is that it allows for the tax-free distribution of funds from a qualified retirement plan to the alternate payee. This means that when a retirement account is divided based on a QDRO, the alternate payee can receive their share directly without incurring immediate tax liabilities, as long as the funds are transferred into another qualified retirement account or plan.

This tax treatment is significant because it facilitates the equitable division of retirement assets during a divorce without burdening the parties with additional tax consequences at that time. However, it is important to note that if the alternate payee withdraws the funds for personal use, applicable taxes and penalties may apply just like any other withdrawal.

The other options suggest misinterpretations of QDROs. For instance, a QDRO does not prevent future tax liabilities (as indicated in the first option), it does not mandate immediate payment of all funds (which could create liquidity issues), and it certainly does not prohibit pensions from being divided (the primary purpose of a QD