Colorado QDROs are used to divide a retirement plan in a divorce or legal separation. The division is tax-free. However, cash distributions are taxable income.
There is no other way to divide a retirement plan in a divorce or legal separation.
An Alternate Payee who is younger than age 59.5 does not incur the 10% early withdrawal penalty if a cash distribution is taken from the new QDRO account. But in contrast, if the Alternate Payee is younger than age 59.5 and takes a cash distribution from an IRA the 10% early withdrawal penalty must be paid, in addition to ordinary income tax. (So don’t roll qualified retirement plan money such as a 401(k) account over into an IRA and then take a cash distribution if younger than age 59.5.)