Pension Divorce Settlement

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At the time of divorce, pensions are divided and the details are included in the QDRO "Qualified Domestic Relations Order." This is a document that must be according to ERISA (Employee Retirement Income Security Act) and must comply with the pension plan guidelines of the company.

Computation of retirement amount in Pension Divorce Settlement

  • Retirement plans are one of the following 3 types
    • Covered by ERISA
    • IRS tax qualified (IRS is Internal Revenue Service. This is an agency that executes internal revenue laws and gathers taxes)
    • Employer sponsored

    In all these 3 cases, the spouse is eligible for a part of the earnings that were accrued in marital life. The first step is to ask the administrators of a retirement plan, that the plan belongs to which of the above mentioned 3 types

  • The divorcing spouse must ask the pension plan administrators for a QDRO. This QDRO is a legal paper that indicates the manner in which the pension plan administrators should disburse the share of the benefits of retirement to the spouse. In the absence of this document, all the benefits of retirement would be directed to the ex spouse. Hence, for each retirement plan held by the ex spouse, you should have a separate QDRO

  • The next step is to fill out the QDROs. It has been observed that if the divorce settlement is straightforward, the divorcing spouse can fill the QDROs by self

  • If the divorce settlement is complex or you are entitled to substantial benefits, then you should hire the services of a lawyer who has specialization in QDROs. You may ask this lawyer to generate custom QDROs instead of the generic forms

  • The information filled in a QDRO must match the terms of the divorce settlement as well as the terms of the retirement plan. It has been noticed that a considerable amount of legal finesse is essential to draft a QDRO that fulfills both these conditions

  • Consider that a retirement plan is not covered by a QDRO. Then, you can determine your part of the benefits by hiring the services of an actuary. This actuary considers some factors like age, health, family medical background etc and uses this data to compute your part of benefits. The work of this actuary will be included in the settlement agreement

  • You should hire a lawyer to incorporate all QDROs and actuarial report in the divorce settlement

Tips regarding Pension Divorce Settlement

  • Some states in the United States have the concept of "double counting." As per this method, while calculating child support, the money received as a pension is taken into account. The computation of child support is partially dependent on the income

  • Consider that a divorced person earns pension after the divorce. Depending on the state, there are two possibilities. The ex may or may not be entitled to the pension benefits collected after the divorce. One must check with a local divorce lawyer regarding the existing rules in the specific state

  • Assume that a wife had waived her rights as a beneficiary in the retirement accounts of her ex husband. However, after his death it was found that 2 retirement accounts of the ex husband had named her as a beneficiary

    ERISA demands that the divorce decree must unequivocally state the benefits of being waived. The waiver that the wife had signed is not adequate to cancel her rights as a beneficiary to the retirement account regarding which she is a designated beneficiary. Now, such a wife must find out whether her state adheres to ERISA rules

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