Jackman & Kasody PLLC
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When dividing assets after a divorce, an unexpected cost may come as a surprise to many Michigan couples who are ending their marriages. Splitting up assets can often be complex, legally and emotionally, but an extra 401(k) division fee can be financially painful as well.

A qualified domestic relations order is the mechanism used to divide assets in a defined-contribution retirement account like a 401(k) during divorce proceedings. While some companies include the fees for complying with these orders within overall plan management costs, other third-party providers can charge fees that can range up to hundreds or even thousands of dollars. In 2015, a survey revealed that these fees are charged by 55 percent of plan sponsors.

These fees can be controversial, as plan sponsors have a fiduciary duty to care for the funds of clients invested in their 401(k) funds. The QDRO itself requires precise phrasing to meet the guidelines for dividing retirement benefits in a tax-protected account like a 401(k). While divorce already comes with a number of expenses, the QDRO fee can be an extra blow. If an initial QDRO is rejected, the client may have to pay more than once. In addition, specialized requests outside a standard form can lead to additional expenses with some big plan administrators, including Fidelity, the nation's largest 401(k) manager.

In a situation where a couple is divorcing and retirement accounts must be divided, a family law attorney can often prepare a QDRO on behalf of a client and submit it to the court for its approval. Attorneys who have experience with these particular matters can help to ensure that the language follows the precise format required by the plan administrator.

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