Your Money Show – Custody Battle Over Your 401k
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Yourmoneyshow talked about an employee who worked for the ABC Company and got fired in 2013. By July 2014, the employee rolls over his 401k into his IRA. By August of 2014 employee commits suicide.
In March of 2015, ex-wife sends letter asking for her share of the 401k. Her request is denied as no Qualified Domestic Relations Order (QDRO) is received. In June of 2015, the ex-wife sends another letter to ABC Company. The letter states that at the time the employee rolled his money over to an IRA, he was legally divorced and the ex-wife is threatening to sue as she didn’t get her share of her ex-husband’s 401k.
As a business owner or HR manager what would you do in this situation?
What if the ex-wife threaten to sue you because you did not freeze or prevent the participant from withdrawing the funds. What would you do?
These type of situations are just some of the issues that should be documented. Unfortunately 99% of retirement plans don’t have any documents that cover these types of situations. There is very little regulation in the area of QDROs. With little regulation, the courts look to see whether a retirement plan has written procedures in place to handle disputes between the plan and participants or alternate payees.
With the number of divorces on the rise, it is in your best interest to have a comprehensive procedures in place to handle divorce situations.
We also talked about how to handle an employee with bad body odor. Tread lightly depending on what you say, that employee might be covered by the American Disability Act. Yes BO could be considered a disability.