<p>
I am bothered by it. It’s wonderful if you don’t see it as overstepping. I do and there is nothing wrong with respectful disagreement or seeing the same situation in a different way.</p>
<p>
</p>
<p>Well, no, as a matter of federal law (ERISA, which has been on the books since 1974), your 401(k) is not solely yours, and your husband’s pension is not solely his. A 401(k) or defined benefit pension automatically goes to the surviving spouse upon its owner’s death, UNLESS that spouse has expressly consented to waive that right and allow the owner to name someone else as beneficiary. That’s a right that just automatically vests upon marriage, or upon the account’s creation if the couple is already married; in effect, it makes your spouse a part-owner of your 401(k), and you a part-owner of his pension. The reason for it is that there was always the occasional jackass (usually male, but not always) who would secretly name a third party (e.g., a mistress) as the beneficiary of his retirement accounts, and leave the surviving spouse high and dry. And for similar reasons, the consent rule needs to be applied to early withdrawals; otherwise, that same jackass could get around the restriction on beneficiaries at death by draining the retirement account early and giving the money to the mistress. </p>
<p>Most people find this unobjectionable, and in fact welcome legal protection. But it does make it difficult to get at money in a retirement account in the situation you describe, where there’s a troubled or failing marriage and one of the parties unreasonably withholds consent.</p>
<p>Who owns the 401k, the wife or the husband? If it’s the wife’s, is she still working at the company?</p>
<p>The loan application for my company’s 401k plan does not require a spouse’s signature. Perhaps that is an option.</p>
<p>My plan also allows for a hardship withdrawal in certain cases, for example if you are being foreclosed on or evicted. The form for this also does not require the spouse’s signature.</p>
<p>The mortgage is probably the least of her worries. It will take the bank a long time to foreclose, it could be years. If the house is jointly owned, it would make no sense for her to make payments, it is essentially giving money to the husband.</p>
<p>
Hmm. You may have hit on something there. I would be fine with consent if there were an opt out. My company doesn’t provide one but that may just be its choice. Thanks guys!</p>
<p>Zoosermom,</p>
<p>Considering your friend’s situation, she needs to discuss this with her qualified divorce attorney and a good CPA to help her navigate through the mess. </p>
<p>Agree with a previous commenter who said your friend’s problem’s far bigger than being unable to withdraw from 401K accounts without spousal consent.</p>
<p>Well gee, Cobrat, I’m always so grateful for your wisdom.</p>
<p>Zooser…</p>
<p>It sounds like your H and you view each of your retirements as your own, and that’s fine.</p>
<p>BUT…what if only ONE spouse has the retirement plan (or has the much bigger one)? that acct is “owned” by both.</p>
<p>I realize that the situation that you describe is rather odd. But, it most cases, the rules are there to protect a victim spouse.</p>
<p>What is going on? Does the H just want the house to go into foreclosure? Was she planning on keeping the house and he’s trying to cause trouble with that.</p>
<p>notrichenough–who owns the 401K, technically neither the wife or the husband–the company for which they work owns the 401K until the employee separates. It would be easier to discuss this issue if Zoo would clarify why she has an issue with this outside of saying “I have a problem with it” so we could discuss that vs a law that was put into place to protect millions of other people besides Zoo and her DH.</p>
<p>
You are being way too literal. I certainly consider “my” 401k to be “mine”, it doesn’t really matter to me whether the assets are actually in my name or are held in trust for me, or whatever else the fine print might say.</p>
<p>There are quite a few limitations on the “mine.” The employer can, and usually does, severely limit the investment choices for 401k/403b accounts, and can even change investment choices midstream. The employee cannot take control of the account until he/she leaves the employer, except that accounts that were funded by voluntary contributions can be controlled by the employee when he/she reaches age 59.5.</p>
<p>Zoosermom, your friend needs to talk to the benefits department, and her lawyer regarding her ability to get to the 401K money. I think the employer may have provided the spousal signature requirement, since I am familiar with rollover and withdrawal cases where the spouse did not have to sign. The rollovers were upon termination, and the withdrawal was an in service for an employee who reached the retirement age. Granted neither was a loan, so perhaps a loan is different - I don’t know. I think certain requirements are plan specific. We don’t even allow loans from our 401k at all.</p>
<p>Technically the 401k is ‘owned’ by the plan provider until you either leave the company and/or retire, but the funds are still yours, in the sense that with most plans the employee directs investments and such that the 401k money is invested in…I would argue it is the employees, because money in there is theirs to take with them when they leave the company, subject to federal rules and such. </p>
<p>The reason for those rules is because with legal recognition of marriage makes any assets in the marriage jointly shared automatically (spouses automatically inherit unless a will deems otherwise and so forth), so the assets are thought to be automatically jointly owned. The opt out is to protect spouses from abuse, it prevents, for example, a spouse before a divorce taking assets out of a 401k or an IRA and hiding them from the other spouse when it comes to dividing assets. </p>
<p>Zooser, if you and your husband want to keep things separate, it is quite possible and easy to sign off on the rights to the plan, to make the other sole owner of the plan (and if you still want the other to inherit the plan in case one of you dies, it will automatically go to the surviving spouse or if you are paranoid, have wills specifying that). You have the right to give up that default consent, all it takes is signing a form, least from what I am seen.</p>
<p>
</p>
<p>No, this isn’t right. I’ve spent quite a bit of time with this because of a complicated family situation. The laws of intestacy under which a surviving spouse “automatically” inherits some of all of the deceased spouse’s assets are a matter of state law, and those rules vary considerably from state to state as to what fraction of the assets the surviving spouse takes, and under what circumstances. Often it needs to be shared with other heirs, e.g., children. And whatever the laws of intestacy say, that’s easily overcome by writing a will, which is a unilateral act. </p>
<p>The law that prevents the (beneficial) owner of a 401(k) or pension plan from acting unilaterally without the spouse’s consent is a federal law, ERISA, enacted in 1974. That part of the law was enacted as a protection for spouses that state property law in most cases doesn’t provide. The law provides that the non-earning spouse’s interest the earning spouse’s 401(k) or pension plan automatically “vests” upon marriage or upon establishment of the 401(k) account or the vesting of the pension right, whichever comes later. It is, quite literally, a property right held by the non-earning spouse, making the non-earning spouse to that degree co-owner with the earning spouse.</p>
<p>If the normal form of payment is an <em>annuity</em>, then the spouse must agree to distributions over $5k. Some 401(k) plans have this option; many don’t. If it is a money purchase, target benefit or defined benefit pension plan (i.e., the employer has a mandatory funding obligation), then a spouse must agree to distributions over $5k. This is based on the idea that the spouse is forfeiting future rights to benefits payable from the plan under an annuity.</p>
<p>Not all 401(k) plans permit loans. If her plan has a hardship distribution provision, she can take a hardship (and under ERISA/IRS rules, payment of mortgage is a valid reason for a hardship distribution). If she’s under 59.5, she’s going to get hit with taxes and penalties for early distribution – but if she takes a hardship for under $5k, she should be able to circumvent the spousal waiver. </p>
<p>I would take a loan if she possibly can; interest and principal go right back to her account. She’d have five years to repay. </p>
<p>Zooser, you colleague should talk to her attorney about a Qualified Domestic Relations Order (QDRO) which may be able to get her access to her funds. Has to be signed by a judge and is usually related to distribution of benefits in case of divorce. If she has more pension benefits than her H, she should expect that any settlement is going to include some distribution of that value, whether it comes out of the plan or an equivalent amount comes out of other marital assets.</p>
<p>However – if he gets a chunk of her 401(k), HE is the one liable for the taxes on same. He can roll it to his own IRA, in which case it’s tax free, or he can take it in cash, in which case it’s taxable to him.</p>
<p>(401(k) admin here)</p>
<p>notrichenough–It is not about being literal. It’s about who really owns the account AND who owns the rights to make the rules about the account. Some of the rules are ERISA rules and others are set by the company. It makes a difference in this discussion.</p>
<p>ZM,
Here’s an IRS website that has some info about hardship distributions (also includes loan info) for 401K accounts.</p>
<p>[401(k)</a> Resource Guide - Plan Sponsors - General Distribution Rules](<a href=“http://www.irs.gov/retirement/sponsor/article/0,,id=151926,00.html]401(k)”>http://www.irs.gov/retirement/sponsor/article/0,,id=151926,00.html)</p>
<p>Good luck–sorry your friend is having to deal with this–she’s lucky to have you looking out for her.</p>
<p>FWIW, I think the reasoning for having spousal CONSENT relating to the spouse’s 401K and/or other plans is the recognition that sometimes one partner may sacrifice more than the other at times in raising a family or so that the partner can pursue his/her career. In an effort to even things out, both partners have some ownership/consent/veto rights in retirement benefits. This may apply more to some relationships than others.</p>
<p>I know MANY families & marriages where one spouse clearly spent more of the time, energy and resources raising the children and was willing to have career uprooted for spouse’s career opportunities and needs. It seems fair to me that retirement benefits of both partners should be split. </p>
<p>This law protects spouses from unknowingly being divested of any retirement benefits earned by their spouse–one of my widowed friends recently was sadly surprised to learn that her H did NOT leave her any retirement benefits that would continue paying after his death. (His pension started before the ERISA law went into effect.)</p>
<p>
</p>
<p>A somewhat similar situation. In grad school I had a part-time job for a defense contractor where my boss was a retired NAVY officer … classic double dipper … academy, 20 years in the Navy, retired at 42, and was working for this defense contractor on Navy projects. I only kept the job for a short time and my boss as the major reason … the reason I left was his attitude about his divorce and his ex-wife. </p>
<p>He moved something like 8 times in the 20 years he was in the Navy and he was a sub guy so he spent nearly half his time at sea and out of touch with anyone not on his sub. His wife followed him through all the moves, took care of all his business when he was at see, and raised the kids as essentially a single parent most of the time.</p>
<p>Everyday at work he ranted about how unfair his divorce was and his ex-wife … what was his complaint? She was a blood sucking *itch … he had been in the Navy for 20 years; he earned the pension; the pension should be his and she didn’t have rights to a penny of the pension. He believed that his ex-wife and the judge were beyond contempt for the divorce decree that awarded her part of his pension.</p>
<p>I have a hard time understanding anyone backing his position that it’s his call that his wife should get nothing.</p>
<p>(PS - ZM … I hope things work out well fro your friend … and that she finds a good work around for the protections that overall are a good thing but are making her situation more complicated).</p>
<p>
While this is true, it’s not so much the reason for the consent provision. The reason for it is to prevent a spouse from being divested of the pension/retirement funds and then having to call on government assistance. It was to limit the burden that fell on Social Security and state welfare programs (which get federal funding) that was occurring when (mostly) men drained the accounts and left (mostly) wives & widows without anything.</p>
<p>(Haven’t read the whole thread, so sorry if I am repeating something)</p>
<p>Zoosermom, you live in a community property state. That means that all earnings during marriage are the joint, community property of both spouses - and that would include the value of any 401K established during marriage, or that portion of the 401K value attributable to contributions made during marriage. The spouse’s consent is required because the funds are, at least in theory, 50% his. If the only route to “financial independence” is for one spouse to make off with money belonging to the other spouse… then that spouse needs to reconsider and reevaluate their options, preferably after consulting with a divorce lawyer.</p>