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Some fees may be charged in splitting a 401(k)

California couples who are getting a divorce and who need to divide their employer-provided 401(k) account may not be aware that they need a document known as a Qualified Domestic Relations Order in order to complete that process. This is a complex document, and although it is required by both the court and the plan sponsor, there may also be a fee attached. The fee might be even higher if any changes are made.

This fee varies from employer to employer, and in cases where it is built into the plan, people will not be required to pay it. However, if third-party administrators are involved, it could range from $300 to upwards of $1,200, and this is on top of attorney fees.

One adviser says that fees of between $500 and $1,000 are reasonable because of the administrative complications involved in a QDRO. Others say that the fees are simply a way for administrators to rake in more money. Examples of changes that would increase the fee from one company include changing how payments are made when the option desired is not on the form or changing a definition on the form.

Unfortunately, the QDRO is a necessary document if people must split a 401(k), so people who are getting a divorce should meet with their attorneys in order to understand what fees, if any, they will need to pay on top of the usual expenses. Couples who are creating a prenuptial agreement might want to keep this in mind as well and treat an existing 401(k) as the separately-owned property of the person who is contributing to it to avoid the complications of dividing the account if the eventual marriage comes to an end.

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