The division of retirement benefits in a divorce or dissolution case is quite complicated. Here are some of the basic concepts, which every person must be aware of when divorce is on the horizon.
What is a Qualified Domestic Relations Order?
Many parties to a divorce participate in employer-sponsored retirement plans such as a 401(k) plan or a defined benefit pension plan. The former is a tax-deferred savings plan.. The latter is a plan which pays out a monthly benefit in an amount determined by the plan when an employee retires. A party’s interest in one or more of these plans is frequently quite valuable. When a party’s interest in a retirement plan was acquired during the marriage, that interest is subject to division as marital property if the parties terminate their marriage by divorce or dissolution. Certain types of retirement plans are called “qualified plans” because they are subject to the requirements of the Employment Retirement Income Security Act of 1974 known as ERISA. The division of qualified retirement benefits in a divorce requires the entry of a Qualified Domestic Relations Order by a court with jurisdiction over the parties and over the marital estate.
Are there employer sponsored retirement plans, which can’t be divided by Qualified Domestic Relations Orders?
The answer to this question is yes. The distinction between qualified and other types of plans causes confusion among attorneys and their clients. There are many retirement plans, which are not subject to ERISA and therefore cannot be divided by a Qualified Domestic Relations Order. These private or public employees retirement plans are typically divided pursuant to the laws (other than ERISA), which govern these plans. For example, the federal government has two retirement plans, the CSRS and FERS. The division of these plans is governed by federal law. The law is quite picky: an order dividing retirement benefits in one of these plans must be titled Court Order Acceptable for Processing or “COAP”. The contents of a COAP must comply with the requirements of the governing federal statutes and regulations. Similarly, the military has retirement benefits for active service members and members of the reserves and the national guard. The division of military retirement benefits is governed by federal statutes and regulations. Again the orders dividing these benefits are not QDRO’s because military retirement plans are not governed by ERISA. The military is not quite as picky as the civilian federal government in that a court order can be called a military pension division order or similar order.
Peggy A. Roston represents clients in all aspects of divorce law and has extensive experience preparing qualified domestic relations orders and similar orders incident to a divorce. Peggy is well-versed in the applicable federal laws governing private pension plans, federal civil service pension plans and military pension plans.
Posted in: Divorce