Retirement plans and the house are usually the most valuable assets of a marriage. Dividing retirement plans can be a fairly complex subject, especially when the plan either existed before the marriage or will continue to accrue benefits after the marriage. However, since pension plans and other retirement plans can be quite valuable, its important to make sure your divorce attorney properly identifies and values the retirement assets.
All through the marriage I worked for my retirement plan. Does this mean now that there’s a divorce I have to share it with my wife?
Generally yes. A retirement plan, to the extent it is earned during the marriage, is marital property. There are two ways to consider the value of the plan. One party can be awarded an interest in the plan and the other can be awarded property with a value that offsets the value of the pension plan. Otherwise, the parties can divide the interest in a pension plan through a document that is called a Qualified Domestic Relations Order (QDRO).
Contributions to my retirement plan at work started 15 years ago and I have been married for 10 years. Is my retirement plan marital or non-marital?
Both. Overly simplified, the law favors a fraction approach to dividing a pension plan. This pension plan would be 5/15 non-marital and 10/15 marital, or 2/3 marital. A pension plan is marital whether it is vested or not.
But the pension plan was paid for entirely by my employer. I didn’t put any money into it. Does it still belong to the marriage?
As to the portion of the pension plan which is marital property (earned during the marriage) is the court going to divide it 50/50?
No, not necessarily. As with other marital property the judge has broad discretion. There is no 50/50 rule. Most cases fall within the 60/40 range to 50/50 range.
What is the difference between a defined benefit plan and a defined contribution plan? And what is the difference as to how the courts treat them in divorce cases?
Think of a defined benefit plan as an annuity. Under this type of annuity there are payments that usually start at age 65 and are paid for the lifetime of the pension-holding spouse.
The other type of plan is a defined contribution plan. Think of this type of plan as a “what you see is what you get” type plan and the pension holding spouse will receive a plan statement from the employer which will show an account balance.
And complicated matters further, hybrid plans that can have aspects of both. Further, there are plans provided by the State or Federal Government with unique features.
How will I be assured that I receive my share of my spouse’s retirement plan?
The court can award you your share of your spouse’s pension plan by a document called a Qualified Domestic Relations Order (QDRO). This is an order which must be approved by the retirement plan administrator and which directs the plan administrator as to how and when you will receive your benefits.
Statistically, I should outlive my husband. Can I have survivor benefits under his pension plan?
Generally, this question applies to traditional pension plans (defined benefit plans). There are two mainstream options for ensuring that the non-pension holding spouse receiving her (or his) share of benefits. This can be done via what is called a separate interest QDRO or a shared interest QDRO. Under a separate interest QDRO, the benefits are paid based upon the life of the proposed alternate payee (the spouse who does not hold the pension).
Under a shared interest QDRO, the benefits are paid over the life of the participant (the pension-holding spouse). With shared-interest QDROs, there should be additional survivorship protection to ensure that the alternate payee’s benefits would not terminate on the death of the participant.
A properly drafted QDRO should make certain that it conforms to the intention of the parties.