Early Withdrawal Penalty

To avoid any tax consequences (a distribution and/or an early withdrawal penalty) there needs to be a court order dividing the plan. This is called a QDRO (Qualified Domestic Relations Order). This determines how much belongs to the other spouse. To access the account, the other spouse has two options. Leave the amount where it is until such time that the spouse owner retires or rollover the amount via a trustee to trustee transfer to another qualified retirement account.

Thanks, that makes sense. The person who contacted me thought that giving his 401(k) account to his wife in a divorce, under a QDRO, would mean that the wife could withdraw the money at any time without the early withdrawal penalty. I just knew that couldn't be the case, but I had a hard time finding an answer.