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The Hidden Fee Of Divorce And Certain Retirement Accounts

On behalf of Tasha K. Schaffner of Schaffner Family Law posted in divorce on Thursday, February 9, 2017.

Oftentimes when a couple marries, they look upon everything in their lives as shared property. Unfortunately, if the couple later decides that a divorce is the best course for them, then they may view sharing assets differently. It is possible some Kentucky residents were surprised when they were faced with an unexpected cost when forced to divide one account.

When an employer offers its workers a 401(k), the vast majority of employees may not be aware that there can be a dark side to this benefit. In the event that an employee is headed for a divorce, he or she may also be looking at an exorbitant fee for being forced to divide that account with the former spouse. These fees are charged by the company that keeps the account records and can vary from a few hundred dollars to well over a thousand. Many times, the attorney handling the dissolution for the client is not aware that this particular account division can result in financial backlash.

This fee is referred to as a qualified domestic relations order, abbreviated as a QDRO. Some employers do not pass the cost on to just the employee involved, but it is sometimes spread out to all of the employees through the overall costs. Some attorneys have made efforts to effect change in fees that these companies charge by filing suits against the plan administrators. Not every company charges excessive prices, and some have not raised the fees in years, but there are still employees who may face a cost of over $1,200.

Some companies claim that the fees are increased when paperwork has errors and has to be reprocessed. Regardless of the reasons, for the employees who are charged these prices for the division of an asset, it may feel like an additional penalty. Every Kentucky resident who is going through a divorce may consult an experienced attorney who can guide him or her through the process.

Source:, “The divorce penalty: a 401(k) fee can add insult to injury“, Feb. 4, 2017

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