Family Law Blog

Retirement Plan Property Division

Thursday, June 01, 2017

Employee retirements plans accumulated during a marriage are typically community property. Since these assets are not accessible under IRS or plan rules until a specific age, family law has developed a method to ensure equitable distribution at a future date. This method is called a Qualified Domestic Relations Order (QDRO) and applies to most employer-sponsored retirement accounts.

Employer-sponsored retirement plans are a relationship between an employer and employee. The spouse might be a beneficiary but is not a payee. The purpose of a QDRO is to recognize the spouse of an employee as an alternate payee. This legal recognition must be established for the employer to pay benefits to someone other than the employee.

QDROs are applicable to accounts covered under ERISA, which is the main federal law governing employer-sponsored retirement account.  This includes pensions and 401K’s. It does not include IRA’s and does not include military and many government employee pension plans. IRAs are readily divided in the same manner as other community property. Government employer plans can also be divided through processes that works largely like a QDRO, but which are technically not QDROs.

Formulas that guide division of the plans are well-recognized. Situation-dependent factor may mean that the divisions are not necessarily 50/50. For example, if a spouse with a pension had years of work service before the marriage, that portion of the pension would probably not be community property.

While the formulas provide guidance, the goal of the court will be to achieve just and equitable division in the complete context of the divorcing couple. Some negation will be possible, if it is in the overall interest of the parties. For more information on division of retirement benefits, please contact us.