When couples divorce the net worth of both parties must be accurately calculated by adding up the value of assets minus the value of all liabilities. In many cases the pension plan is completely overlooked, which can significantly affect the future of the spouse who receives no part of the pension. A Qualified Domestic Relations Order will likely be required if a pension (perhaps one of the most valuable assets) is a part of the marital assets. Federal law and IRS regulations dictate that a QDRO must be created during the divorce in order to acknowledge the interest of one spouse in the other’s pension.
A QDRO is a legal document, directing the administrator of the pension plan to disburse a specific amount of one spouse’s pension to the non-employee spouse upon finalization of the divorce. Over fifty million American workers are covered by workplace retirement plans — the QDRO recognizes an alternate payee’s entitlement to a portion of the worker’s pension. This alternate payee must be the ex-spouse, child or other dependent of the worker with the employee pension. Just like the overall divorce decree, a QDRO will likely never be a neutral document, meaning it will more fully benefit one party over the other. It is critical that a highly qualified divorce attorney must be involved in the QDRO form the very beginning of the divorce.
California considers retirement benefits community property, based on the portion earned during the marriage. In other words, if the spouse earning the pension has earned benefits for ten years, but has only been married for five of those, then half of the pension can be considered marital assets meaning the non-pension spouse will receive approximately a quarter of the total worth of the pension. The current value of the pension must be determined in order to properly prepare the QDRO and the risk that the retirement plan might not pay off or might not pay in full must also be factored in.
If you wish to receive your fair share of your spouse’s retirement pension, it is recommended that you speak with a divorce attorney experienced in preparing a QDRO