What is the “Marital Share” of a retirement account?

While seemingly a simple question, this is quite loaded and entirely depends on the jurisdiction of the divorce.

When did the marriage start?

The one thing most jurisdictions seem to agree on is that the marital share starts to accrue on the date of marriage. So what is the date of marriage? For some couples, it is simply the wedding date. What about for couples who were in a domestic partnership first, and then married? That’s a question specific to the jurisdiction. Some automatically merge the time of the domestic partnership with the marriage which would make the marriage start at the beginning of the domestic partnership. Some jurisdictions terminate the domestic partnership at the start of the marriage, meaning there are two distinct relationship types this couple has entered into, but that the marriage is second and not “backdated” to the beginning of the domestic partnership.

Another circumstance that might not have a clear date on which the marriage began is a common law marriage. While the parties might agree that all of the legal elements have been satisfied to create a common law marriage, they might disagree on when all those elements were satisfied.

When is the termination date for the accrual of marital assets?

Jurisdictions differ as to when they terminate the accrual of marital assets. As an example, Maryland terminates the accrual of marital assets as of the date of divorce unless good cause is shown otherwise or another date is agreed to by the parties. Across the river, Virginia terminates the accrual of marital assets as of the date of separation unless good cause is shown otherwise or another date is agreed to by the parties. Parties can separate months or years before the divorce becomes final, so depending on where the divorce occurs will dictate whether the retirement contributions being made during the separation period are marital or separate.

What about the interest accrued on my pre-marital retirement balance?

Many times parties are working for an employer before the marriage and continue that employment during the marriage. For some, the pre-marital retirement balance is substantial. Therefore, the interest earned thereon throughout the marriage could also be substantial. If that account were separate and not touched during the marriage, it is typically clear that the pre-marital account and all interest thereon, would be separate property. The issue is not as clear when the account becomes co-mingled during the marriage.

One question is who would be responsible for tracing out the interest earned on the pre-marital balance? Typically, the party making the claim that the funds are non-marital has such burden. They could hire an expert to do that tracing. It all depends on the exact circumstances of the case and is a conversation that should be had with one’s attorney. An estimate or approximation could be used in lieu of a full tracing, if the party does not want to hire an expert to trace every penny.

Another question is how has the market performed since the marriage, and is it worth it to do the tracing? If it was a shorter marriage during a volatile period or downturn in the market, perhaps asking for the market experience on the pre-marital balance is actually a detriment to the account holder. Again, some jurisdictions require the tracing of the investment experience, so for some parties it may not be an option whether the tracing should happen. However, in jurisdictions where the law is not clear these are issues worth consideration before making claims.

What if a loan is outstanding against the retirement account?

If a loan is taken out against the retirement account, it is typically viewed as an asset of the account and may or may not be included in the account’s “total balance” as reported on the account statement. So, that means when determining the “marital share” the parties must determine whether the outstanding loan balance will be included or excluded. Some jurisdictions have laws and cases to handle this situation. Others do not. In jurisdictions that do not have laws and cases on point, some of the considerations include why was the loan taken out? If it was used solely by the party who owns the account, perhaps it makes sense that the other party’s share is not impacted by the outstanding loan balance. If, however, it was used for joint, marital purposes, perhaps the other party’s share should be impacted by such loan. For jurisdictions without laws or cases on the issue it is quite case and fact specific and can be a point of contention in negotiations.

How does all this relate to my QDRO?

Many times, retirement plan administrators suggest dividing the “marital share” of the retirement account, and parties will agree or be court ordered to divide the “marital share” of retirement interests. To be sure, the proper amount of funds is being transferred to the former spouse, it is important to properly define the “marital share.” This can be done by providing a formula or doing out the math to determine a specific dollar amount or percent of the account to be transferred. Some plan administrators may allow a formula, others may not. Markham Law Firm can help figure out how the information can be phrased to the plan administrator, and if in a jurisdiction where we do not practice, can work with your local counsel to prepare an acceptable QDRO that complies with your state’s definition of “marital share.”

Have additional questions, or want us to help with your QDRO? Contact us at qdro@markhamlegal.com or 240-396-4373.

What is a “pre-retirement lump sum” benefit, and can I get one in my divorce?

A pre-retirement lump sum benefit is available from most pension plans. Outside the divorce context, it is paid to a designated beneficiary or current spouse in the event that the pension plan participant dies before they retire and begin to receive benefits from the pension plan. Whether the pre-retirement lump sum benefit (outside the divorce context) can be paid to a designated beneficiary or must be paid to a current spouse is determined by plan rules and federal law. In the divorce context, most plans allow for a Qualified Domestic Relations Order (QDRO) or other, similar order, to supersede the beneficiary designation or plan rules requiring the payment to a current spouse, to allow for a payment to a former spouse.

How is the amount of the pre-retirement lump sum benefit determined?

While the participant is employed, they may be making contributions to the pension plan. In addition, the employer is likely making contributions to the pension plan on the participant’s behalf. These two amounts, as well as interest earned thereon, are usually combined to make up the pre-retirement lump-sum benefit amount.   

How is the pre-retirement lump sum benefit treated in a divorce?

Most plans allow for a QDRO to specify whether all or a portion thereof should be paid to the former spouse (alternate payee) in the event that the participant dies prior to beginning their retirement benefit from the plan. Therefore, it is important that during the negotiation of any settlement agreement or argument in court that the former spouse (alternate payee) include a request for the portion of the pre-retirement lump sum benefit they desire.  

How much of the pre-retirement lump sum benefit can I receive?

A former spouse (alternate payee) can receive up to 100% of the pre-retirement lump sum benefit. Typically, however, a former spouse (alternate payee) would receive 50% of the amount earned during the marriage. For example, if the participant was participating in this pension plan for half (50%) of the marriage, then the former spouse’s (alternate payee’s) benefit would be 50% of 50% of the benefit, or 25% of the total benefit. However, pension plans will typically accept any percentage or easily followed formula that the parties agree upon (or is awarded by the court).

How much of the pre-retirement lump sum can I preserve for a potential future spouse or other beneficiary?

A former spouse (alternate payee) can receive as little as 0% of the pre-retirement lump sum benefit. As stated above, a typical division would award the former spouse (alternate payee) 50% of the amount earned during the marriage. If this is the case, then any additional amount could be available for a potential future spouse or other beneficiary. Some plans may allow for only one person to receive this benefit, however. So, it is important to research whether this is a plan rule – if that is the case, then if the former spouse (alternate payee) receives any part of the pre-retirement lump sum benefit then the remainder would not be available for a potential future spouse or other beneficiary.

Can a Court award the pre-retirement lump sum benefit?

If the participant’s interest in the pension was earned during the marriage and the regular pension retirement benefit is divisible by the court, then it is likely that the pre-retirement lump-sum benefit is also divisible by the Court. However, it is important to consult with an attorney licensed in your state and experienced in family law to be sure for your specific case.

What happens to these contributions by the participant and the employer if the participant does not die before beginning to receive retirement benefits from the pension plan?

In such an event, the contributions from the participant and employer, and any interest earned thereon, are paid out over time as a part of the regular pension payments. In the event that the participant dies after beginning to receive retirement benefits but before all contributions are paid out, the contributions will be used to fund part of the post-retirement survivor annuity. If no one is designated to receive a post-retirement survivor annuity, the contributions will be paid out in lump sum to the designated beneficiary.

What’s the difference between a “former spouse” and “alternate payee”?

 These are both terms of art that tend to be used loosely. However, they both mean the former spouse of a pension plan participant who is entitled to receive a share of the participant’s interest in the pension plan. The reason for the two terms is that “alternate payee” is preferred for plans that are governed by the Employee Retirement Income Security Act (ERISA), as amended and “former spouse” if preferred for plans that are not governed by ERISA.

Disclaimer: Each pension plan is different and may accumulate the pre-retirement lump sum benefit differently or may treat its division differently in a divorce. It is important to research the pension plan in your case to make sure that 1) the pre-retirement lump sum benefit exists as a benefit option; 2) that the pre-retirement lump sum benefit can be divided in a divorce; and 3) what language the plan needs to properly make the division, if allowed. The information provided here is based on Markham Law Firm’s experience in dealing with pension plans and the majority of plans encountered. If you have a pension in your case and you want help to determine the benefits available and division types allowed by the plan, give us a call at 240-396-4373 or email us at: qdro@markhamlegal.com.

In addition, each state has its own laws regarding the division of property. It is important to consult with an attorney licensed in your state regarding the division of property and how pensions and their benefits are treated in your state.

Considerations in Dividing Defined Contribution Accounts

“Earnings, gains, and losses” and “market fluctuations” are two phrases used to describe the investment experience of the funds within a defined contribution account (401k, 403b, 457, TSP, etc.). In dividing a defined contribution account pursuant to a domestic relations order, the parties usually have the option of including earnings, gains, and losses on the amount to be transferred, or not. If these will be included, then the parties must select a valuation date from which to apply the earnings gains and losses.

What is the valuation date?

The date that the former spouse’s benefit will be valued. No contributions from any source (employee or employer) can affect the former spouse’s benefit after that date.

Why include earnings, gains, and loses on a transfer amount through a domestic relations order?

Division of the earnings, gains, and losses protects against surprises in the market.

Let’s say Spouse A is to receive 50% of Spouse B’s old 401k as of December 31, 2021, with earnings, gains, and losses applied thereon (Spouse B and the employer are no longer contributing to the 401k). At the time, $100,000 was in the account. Due to market fluctuations, at the time the account was to be divided, only $80,000 was in the account. Therefore, each party received $40,000 upon division.

 
Assume the same facts as above, but this time with no earnings, gains, and losses applied. Spouse A will receive $50,000 and Spouse B will retain $30,000.

Continue to assume the same facts, but this time due to market fluctuations only $40,000 remained in the account at the time it was to be divided. Without earnings, gains, and losses Spouse A would receive all $40,000 (even though Spouse A should have received $50,000) and the plan will consider its obligation satisfied. Spouse B would have $0 left in their retirement account and owe Spouse Ten Thousand Dollars.

Why would people not include the earnings, gains, and losses?  

 Sometimes the retirement account is the only cash source large enough to fund a buy-out of a non-liquid asset, such as the marital home. Both parties want the transfer to occur quickly, and they cooperate to minimize the time between the agreement being made and the transfer ultimately occurring. While the market can still have dramatic changes in short periods of time, the chances of dramatic changes are at least decreased the quicker the domestic relations order is created and processed.

Alternatively, the account-owning spouse may have a job that allows them to more quickly accrue retirement assets through things like employer matching contributions. Therefore, the account-owning spouse may want to ensure they are transferring a substantial amount of funds to their former spouse for their former spouse’s retirement savings ability.

How is the amount of earnings, gains, and losses determined?

In short, by a calculation by the plan administrator. The plan administrator will divide the transfer amount proportionally between all investments within the account as of the valuation date, and then trace those specific funds through to the date of transfer.

Most plan administrators require that this tracing be done proportionally through the account, as in, the domestic relations order generally cannot specify that the former spouse will receive a certain amount of each investment within the account. Some plans allow for this specification, but it is extremely rare so it should not be assumed as an option.

What if multiple accounts are being equalized?

The only earnings, gains, and losses that will be considered are the ones in the account being divided. So if each party has multiple retirement accounts, but it ends up that Spouse A needs to transfer $25,000 to Spouse B so the marital portion of their retirement accounts is equalized, if Spouse A makes a transfer out of one account, only that account’s market experience will impact the transfer amount. If Spouse B’s accounts have good investments, it will not decrease the amount being transferred to Spouse B from Spouse A. Similarly, if a different one of Spouse A’s accounts does poorly, it will not decrease the amount being transferred.  

The best way to view the retirement accounts is that they are each completely separate from the other retirement accounts, even if they might be held by the same financial institution or earned from employment with the same employer.

If the parties invest their retirement account completely differently, such that one is very risky while the other is very conservative, it might be worth considering if multiple orders would better serve the parties’ intent in their agreement.

If you need a QDRO prepared or have questions about specific to this QDRO topic, please contact our office at 240-396-4373 or contact us via this form to discuss what your specific case might need.

Posthumous QDRO – Is it Allowed?

The scenario is easy to picture, parties are divorced and a QDRO is needed to divide the participant’s account. They don’t do the QDRO right away, and the alternate payee thinks about their benefit upon hearing the news that the participant died. Can they still get that benefit, or are they out of luck?

The answer hinges on two major case-specific facts, what retirement plan should have been divided, and where did the divorce happen?

The retirement plan in question is important because the first question to ask is whether the plan is governed by the Employee Retirement Income Security Act (“ERISA”). If it is not, then they can more easily make up their own rules, and the attorney’s considerations are focused more on their state court’s willingness to accept a posthumous QDRO and the plan’s willingness to accept it. These will vary enormously in their procedures, so it is best to assume that each plan is different and to do fresh research any time this might come up.

The jurisdiction of the divorce is important because ERISA is a federal law. The circuits are clashing as to whether they will enforce posthumous QDROs and if so, for how long after the participants death. The circuit positions are described below. There are a few circuits that have not yet weighed in on the issue, attorneys practicing in those areas will have to check and see if their state has any precedent.

Minority Opinion

The First and Fourth Circuits are in the minority by rejecting posthumous QDROs. Their argument is based on the plan’s future stability and need to know the benefits payable with respect to each participant as of the date of the participant’s death. Posthumous QDROs may require a plan to pay benefit greater than those actuarily available to the participant and the participant’s survivors, which would be a violation of ERISA and threaten the viability of the plan in the long term.

The First Circuit’s opinion on the issue is per curiam, and it simply refused to enforce a posthumous QDRO due to its rejection by the plan. The First Circuit specifically states that the decision does not determine the question if it would enforce an otherwise proper posthumous QDRO. Garcia-Tatupu v. Bell, 747 Fed. Appx. 873 (2019), affirming lower court decision Garcia-Tatupu v. Bell, 296 F. Supp. 3d, 407 (D. Mass, 2017).

The Fourth Circuit’s opinion is specifically about survivor benefits for a pension plan, noting that surviving spouse benefits vest in the participant’s surviving spouse on the date of the participant’s retirement. Part of this is for plan administration, in that the plan must calculate the participant’s payment on an actuarial basis, therefore it needs to know the identity and life expectancy of the surviving spouse when they begin to make payments. Hopkins v AT&T Global Info. Solutions Co., 105 F.3d 153 (1997). While the benefit in question is the surviving spouse benefit, this is what is described as the “post-retirement survivor benefit” in most divorces, and in plans governed by ERISA may be transferred to the former spouse (from a future surviving spouse) via a QDRO.

Majority Opinion

The Second, Third, Fifth, Ninth, and Tenth Circuits allow for posthumous QDROs, arguing largely that it will not be rejected simply because of the time it was issued, although there is some difference within the circuits there. Specifically, some of these circuits take a view that within the eighteen-month period prescribed by ERISA to review a QDRO and segregate the alternate payee’s benefit any QDRO is timely. Patton v. Denver Post Corp., 326 F.3d 1148, 1151 (2003). Patton states that this is because ERISA clearly allows for revised QDROs to be submitted within the eighteen-month period, so too can new Orders be accepted because payments during the period can be retroactive.

In this Tenth Circuit opinion, Patton also makes clear that no notice to the Plan would be required prior to the participant’s death – whether by notice of divorce, marriage, or otherwise.

Alternatively, they state that because a QDRO is the key to enforcing an otherwise valid interest in a retirement plan, “there is no conceptual reason why a QDRO must be obtained before the plan participant’s benefits become payable on account of his retirement or death.” Trs. of the Dirs. Guild of America-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 421 (2000).

Circuits yet to opine on the issue: Six, Seven, Eleven, and Twelve

The cases discussed herein are largely with respect to pension plans and survivor benefits. The reason for this is simple – when the retirement asset at issue is a defined contribution plan (ie: 401k, 403b, TSP, etc.) the plan will make a payment to the beneficiary upon receiving notice of the participant’s death. At such time, the plan has no additional funds available to pay to an alternate payee should the plan receive a QDRO after such payment is made. Therefore, any enforcement action by the alternate payee would more properly be directed at the beneficiary rather than the plan.

Note: some cases cited may not be published opinions but are provided for information and research purposes.

If you need a QDRO prepared or have questions about specific to this QDRO topic, please contact our office at 240-396-4373 to discuss what your specific case might need.

When a Reduction to the Former Spouse’s Payment is Required by the Plan

Certain plans, such as the Interamerican Development Bank and the International Monetary Fund limit the amount of the participant’s pension that can be given to a former spouse or otherwise reduced. Other reductions might come from providing a survivor benefit to a former or current spouse.

Specifically, a participant must receive at least 50% of their unreduced pension benefit upon retirement with these two plans. Since both of these plans require a reduction to provide a survivor benefit, this means that a participant cannot give a former spouse both 50% of the pension benefit and ANY survivor benefit.

This requires a certain amount of math to figure out what can be provided to the former spouse and still provide the participant their minimum required benefit. This is not something attorneys can do for their clients, unfortunately. However, a willing participant could work with the HR department to run various scenarios for the parties to discuss.

In a negotiation or trial on the matter, obtaining this information requires some advance planning to avoid delays. If you’re dealing with one of these or a similar plan, call us at 240-396-4373 to discuss any questions you may have.

Cost of Living Adjustments and Military Pensions

Earlier this year the Appellate Court of Maryland (formerly the Court of Special Appeals of Maryland) heard the case Martinez v. Lopez, No. 835-2021 (April 7, 2023). The issues addressed pertained entirely to an award to the Wife of the Husband’s military pension benefits. While some of the holdings are reiterations from other cases, others are new and help clarify how to treat these pensions.

1. The 10/10 Rule is only a limitation for the former spouse to receive benefits directly from DFAS. What is the 10/10 rule? The parties must be married for 10 years, during which the member serves 10 years in the military, qualifying for retirement credit. In this case, the parties were married for a little over 5 years, so this requirement has not been met. It is important to remember that this limit does not impact state law and the divisibility of marital property. It only prohibits the former spouse from receiving the benefits directly from DFAS – meaning that the member must pay the former spouse directly each month for the spouse to receive the benefit.

2. An award of a Survivor Benefit to the former spouse is entirely within the Court’s discretion in Maryland. Check your state’s laws to see if the survivor benefit is treated as a part of the pension or as a separate asset. If your state treats it as a separate asset, be sure to discuss it separately in any agreement and request it separately in any pleading.

3. The adjustment of a direct payment of retirement benefits for tax purposes is within the court’s discretion. When the member receives their military pension payment, it is taxable income to the member. A payment after that made directly to the former spouse from the member would necessarily be made post-tax. A party can request that the direct payment amount be adjusted since the member is paying the income tax for the former spouse in this scenario. However, this case confirms that such an adjustment is at the discretion of the court to award.

4. Cost-of-Living Adjustments are automatically applied in payments to a former spouse when the payment comes from DFAS. It is not necessarily the case in direct payments. The Court discusses a Department of Defense Financial Management Regulation that states in a case where the National Defense Authorization Act for Fiscal year 2017 is applicable (i.e.: divorce of most military members occurring after December 23, 2016), COLAs will be applied to the benefit paid to the former spouse, regardless of what is stated in the court order. However, if benefits are being paid directly from the service member to the former spouse, the court has discretion whether to award COLAs on such payment amount and, if so, how they would be measured. In Maryland, the person seeking the marital property is burdened to evidence its value. According to Martinez v. Lopez, such analysis is important when seeking COLAs on a direct payment of these pension benefits.

Additionally, the court was asked whether it is within the trial court’s discretion to make one party solely responsible for the costs to prepare a domestic relations order to divide the retirement asset. It was determined the issue in this matter was moot, so it was not addressed. However, this author hopes there will be an answer one day.

Please call us at 240-396-4373 or click here to contact us if you have a divorce matter involving a military pension.

Retirement Accounts as a Source of Support Payments – Tax Considerations

We’ve all had cases where one party owes child support or alimony arrears but does not have the cash in the bank to make the lump sum payment nor the income available to make substantial payments toward those arrears.

Defined contribution plans, such as 401k, 403b, etc. that ERISA governs can be used as a source to pay these arrears in a lump sum. The retirement plan must receive a QDRO stating the amount to be paid and the purpose of the payment.

The QDRO needs to state the purpose of the payment because it will impact who is responsible for the tax payment on the funds. Specifically, if the payment is to pay child support arrears, the account holder will be responsible for the tax on the funds. This is because child support is usually paid with after-tax funds earned through normal employment income. Therefore, the account holder will maintain the responsibility of paying the tax on the funds if they are paid via QDRO.

With respect to alimony arrears, the agreement or judgment of divorce is an essential document. Before the 2017 change to the tax laws, tax payment on alimony could be shifted to the alimony recipient or remain with the payor. The QDRO would have to state the tax responsibility for any agreement entered into prior to 2017 concerning alimony arrears to ensure the tax responsibility remained the same. Currently, the law states that the payor is responsible for the tax on alimony. However, the tax law is scheduled to sunset in 2025, so the ability to shift the tax will return unless Congress decides to extend the life of this law.

Any QDRO preparer, and attorney negotiating this issue, will need to pay attention to the date the agreement is made to properly allocate the tax on alimony arrears paid from a retirement account.

If you need a QDRO prepared for the payment of support arrears, please contact our office at 240-396-4373 to discuss what your specific case might need.

What is the “maximum” survivor benefit?

Each retirement plan has its own rules and terminology. It’s important to know what each word means to each plan. For example, the word “maximum” means the most or the highest amount allowable. So an award of the “maximum” survivor benefit should be clear – the largest survivor benefit allowable under the plan.

Is this what the parties or the court mean to award the former spouse? For example, under the military pension plan, the “maximum” survivor benefit provides up to 55% of the service member’s monthly benefit. The former spouse cannot receive more than 55% of the service member’s monthly benefit during the service member’s lifetime, so in this case, the former spouse would be receiving a windfall should they outlive the service member.

Other institutions in the DC area, such as the World Bank, have a pension plan that includes a 50% survivor benefit at no cost to the employee. However, the employee can purchase a larger survivor benefit, up to 100% of the entire pension benefit. What does “maximum” mean in that case? Is it the largest possible survivor benefit that comes at no cost to the parties, or the largest possible survivor benefit regardless of the cost? Again, the consideration of a windfall to the former spouse upon the employee’s death is an issue.

Knowing how the plan defines terms is key to ensuring the retirement order is drafted and interpreted as the parties intend. Alternatively, if obtaining such information is not possible, being more descriptive in the settlement agreement language will also reach the same goal. Click here to contact our office or call us at 240-396-4373 if you need assistance in reviewing plan documents to figure out their terms.

Pension Benefits are for the Plan Participant and Designated Beneficiaries Only

The Employee Retirement Income Security Act (“ERISA”) provides in Section 1056(d) that any pension plan qualified under ERISA must include a rule that benefits provided under the plan cannot be assigned or alienated, except by Qualified Domestic Relations Order (“QDRO”). As this is a federal law, it preempts any state law to the contrary.

The reason is in the title of the Act – it is designed to protect the retirement income of employees and, by extension, their beneficiaries. In Boggs v. Boggs, 520 US 833 (1997), the United States Supreme Court made this clear. In Boggs, the wife died, leaving her community property interest in her husband’s pension to their sons in her will. The husband remarried, and the survivor benefit was paid to the second wife upon his death. The sons sued to claim they should receive the survivor benefit payments that would have been paid to their mother, the deceased's first wife, since it was given to them in a testamentary transfer.

The court found that the testamentary transfer of the first wife to her sons was a prohibited assignment of the first wife’s benefit. The Court clarified that ERISA prohibits a beneficiary’s testamentary transfer of undistributed pension benefits to another person.

What does this mean in a divorce case? If the case deals with a shared-interest division of an ERISA-governed pension plan and the alternate payee dies first, the alternate payee’s benefit cannot be paid to any third party. It must revert to the participant.

This is only with respect to shared interest divisions of ERISA-governed pension plans. The rules differ when dealing with a non-ERISA governed plan or a separate interest division. If you have a pension plan that you want assistance in handling, or have other retirement issues, please click here to contact our office or call us at 240-396-4373.

What is ERISA and why is it important?

ERISA is the Employee Retirement Income Security Act, a federal statute initially passed in 1974 and revised periodically since then. The main purpose of ERISA is to protect employees’ retirement savings in plans provided by employers by providing minimum standards for the plan fiduciaries.

It is important to note that not all employers have plans subject to the ERISA standards. Specifically, governments at all levels are exempt, as are many church plans and charitable 501(c) plans. In addition, private employers may have some plans that are subject to ERISA’s regulations and some plans that are not.

ERISA impacts family law practice when it comes to dividing retirement interests. Plans that are regulated by ERISA are called “qualified” plans. Most importantly, qualified plans are required to be divisible by QDRO. This requirement means that it is definitively possible to transfer a share of a qualified plan from one spouse to another as a part of the divorce proceedings. ERISA also provides minimum requirements for a participant to take out a loan from a retirement plan or protect a spouse’s interest in the survivor benefit during the marriage. These protections mean that during the marriage, the retirement account is fairly well protected from being disbursed without spousal consent, and the spouse must approve of someone else getting the survivor benefit. Once the divorce is final, though, those protections end. Qualified plans can still have additional rules and regulations that must be followed when dividing it in a divorce proceeding so it is important to look into each plan and know its intricacies.

Non-qualified plans are not subject to these rules and are thus not protected. They are not required to be divisible or to protect a spouse’s interest during the marriage. They may also not provide survivor benefits or require that survivor benefits be provided only to a surviving spouse and not a former spouse. A general word of advice for non-qualified plans is to tread carefully and do additional research into their specific rules.

If you have a qualified or non-qualified plan in your case and want assistance in handling it, or have other retirement issues, please contact our office at 240-396-4373.