Pensions, Retirement Plans, and Divorce

 

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Prior to working in retirement asset division, I exclusively practiced family law, and have handled hundreds of matters related to or arising out of divorce.  This experience in pensions, retirement, and family law uniquely qualifies me to guide parties and attorneys through what can be a confusing and nebulous part of the dissolution process.

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                                                                        What is a QDRO?

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In a divorce, often one of the largest marital assets are retirement accounts.  Parties and attorneys need to take care that retirement benefits are not omitted or dealt with improperly in the course of a divorce proceeding.

 

Private companies that offer retirement plans, including 401(k) plans, 403(b) and 457(b) plans, and other deferred compensation or defined benefit plans are governed by the provisions of ERISA, which limits who may withdraw funds from retirement accounts.  In a dissolution, these accounts must be divided pursuant to specialized orders that are referred to as "Qualified Domestic Relations Orders," or QDROs for short. A QDRO ensures that the non-employee spouse can access his or her share in the employee spouse's retirement benefit, and that after the employee's death or retirement, that the non-employee spouse will retain his or her benefits.

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Retirement benefit plans that are offered by state or local government bodies are not governed by ERISA and so do not require QDROs, but these plans might need to be joined as parties to dissolution actions and the retirement benefits must still be dealt with by stipulated division orders in a procedure that mirrors that of a QDRO.  Retirement plans offered to Federal employees are also exempt from ERISA and have their own set of rules that govern asset division, and must be strictly complied with to be able to preserve the non-employee spouse's rights to the asset.

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The mishandling of retirement asset division can have serious financial consequences for both parties and attorneys; it is possible for a party in a divorce to irrevocably lose their right to certain benefits if the retirement asset division not handled promptly and correctly. I always recommend consultation with an expert when dealing with retirement assets to ensure that no mistakes are made.

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