Are there retirement accounts, plans, or benefits to be divided or assigned?
I help other family lawyers, and divorcing parties directly, evaluate pension benefits and rights and prepare the specialized court orders required to divide or transfer retirement accounts and pension plans. See list of services below.
In many marriages, one or both spouses have a substantial retirement account and/or traditional pension plan. These retirement assets and rights frequently represent a large portion of the accumulated wealth and financial security of the parties. It is not surprising then that how the value of these accounts will be allocated in divorce can be a topic of great importance to both spouses.
When it comes to deciding whether and how (if at all) retirement plans and benefits will be divided, an essential task is to obtain an accurate valuation of the asset. This may be straightforward in the case of any account in an individual’s name, like an IRA or 401(k), because the account holds specific assets and is registered in one individual's name. With traditional pensions, in contrast, there is no distinct account owned by the employee, but rather the value is in a promise by the employer to pay the employee a certain amount upon and/or after retirement if specified conditions are met. Valuing traditional pensions and other “defined benefit plans” require calculations that involve judgment and specialized financial expertise. Placing a value on a traditional pension at any point in time, even after payout has begun, requires a “present value” calculation, which in turn depends on what assumptions are made about interest rate (“discount rate”), the life expectancy of the employee and, if there is a survivor benefit involved, the life expectancy of the non-employee spouse.
Once the value (or range of possible values) of a retirement account or plan is known, the next step is understanding what the payout options are and what the limits are on the portion of the account value or the right to receive benefits that can be transferred to the non-employee spouse in divorce. This step is frequently not straightforward because pension plan rules and documents are voluminous, technically written, and not readily understood by plan participants and their lawyers. I am comfortable with and actually enjoy navigating my way through these documents and distilling the relevant information from them.
When the value and the payout and division options are understood, the parties can then address in their overall negotiations what to do with the retirement plan(s) they have.
The last, and critical, step after agreement has been reached is to prepare a court order directing the financial institution holding the account (or the company owing the traditional pension benefit) what to do with the employee’s account or pension entitlement. Preparing such orders can be straightforward, but there are often pitfalls that, even if seen, are not necessarily simple to avoid. Sometimes missing these pitfalls only leads to delays; at worst, they can lead to dramatically different financial results than the parties intend. For this reason many divorcing couples and divorce lawyers refer out the task to an attorney with specialized knowledge and skill in understanding pension plans and drafting pension orders. Preparing these orders is among my specialties. I am available to divorcing parties and divorce attorneys to help in the analysis of pension rights and other retirement benefits, to prepare appropriate court orders to implement the parties’ decisions, or to review before submission pension orders prepared by themselves or others.
My services in this area include:
- Review and analysis of:
- Private and public company defined-contribution and defined-benefit plan rules and documents
- Government defined-contribution pension plan rules and documents
- Settlement-agreement language prepared by others to implement divorcing parties’ decisions about the division of retirement accounts and benefits
- Qualified Domestic Relations Orders (QDROs) and other retirement-related court orders prepared by others (see list below)
- Advising attorneys and individual clients regarding strategies for negotiating the allocation of retirement benefits in divorce
- Engaging and supervising the work of pension-valuation experts
- Drafting domestic relations orders for dividing or assigning:
- Private and public company 401(k) plans and traditional defined-benefit pensions. Court Order is a Qualified Domestic Relations Order (QDRO).
- Public-school or nonprofit organization 403(b) plans. Court Order is a Qualified Domestic Relations Order (QDRO).
- State and local government 457(b) plans. Court Order is a Domestic Relations Order (DRO). 457(b) plans are usually not "qualified" plans; they may not be obligated or even permitted to honor a DRO.
- Federal Employee Retirement System (FERS) (pension) benefits. Order is a Court Order Acceptable for Processing (COAP)
- Thrift Savings Plans (TSP) for civilian and military service
- Military Retired Pay, including Survivor Benefit Plans (SBPs)
Please contact me to discuss your or your client’s specific situation.