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 pension 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 traditional pension plan through a document 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. Yet this is an oversimplification. It depends whether your retirement plan is a defined contribution plan, a defined benefit plan, or a hybrid plan.
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?
That is the starting place. But an equal division is not required.
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. The pension-holding spouse will receive a plan statement from the employer that shows an account balance.
And complicating matters further, hybrid plans have aspects of both. Finally, 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 (if it’s an ERISA covered plan) by a document called a Qualified Domestic Relations Order (QDRO). This is an order which must be approved by the retirement plan administrator. It 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 for ERISA covered plans. 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. But this is only possible if this form of benefits has not been waived.
A properly drafted QDRO should make certain that it conforms to the intention of the parties.
What if a QDRO or a QILDRO was never entered at the time of the divorce? What can I do now?
First, consult with a capable divorce lawyer who has experience with this issue. The language of the underlying settlement agreement is often critical. We also see issues such as whether the plan is in pay status. That means that the pension participant is receiving benefits. This can effect the options for what can be done if a QDRO was not entered. For QILDROs, the law is even more complex. The Gitlin Law Firm has experience dealing with these issues on behalf of both the Participant (the spouse who has pension benefits) and the Alternate Payee (the spouse who does not hold the benefits).