Dividing 401(k)s And Pension Plans

Equity earned over the course of a marriage in a pension fund, 401(k) savings account or IRA is subject to division upon divorce. There are, however, certain issues that must be taken into account that can complicate how retirement funds are divided.

In general, a qualified domestic relations order (QDRO) must be prepared, sent to the plan administrator and approved by the plan administrator of a retirement plan in order (QUALIFIED) and then signed (executed) by your court (DOMESTIC RELATIONS ORDER) to provide the alternate payee (ex-spouse) with an ownership stake in his or her former spouse's pension plan by creating a separate, individual account in that plan for the non-employed ex-spouse. Only those plans subject to the Employee Retirement Income Security Act (ERISA) require a QDRO. As such, when filing a QDRO, it's essential that it comply with ERISA guidelines.

At Leonard M. Roth, Attorney at Law, I help clients prepare and file all necessary paperwork with a plan's administrator related to qualified domestic relations orders. My office ensures all necessary documentation is included and that the forms used ERISA-compliant and accurate.

The Division Of Retirement Funds

If you were in an employee benefit plan prior to marriage, that plan is your separate property up to the time of marriage and is not subject to division by the court (this is usually easily ascertainable). That amount earned or acquired during marriage is divisible by the court. Normally, these accounts are split evenly, 50-50, but the division can be disproportionate by agreement or by court order due to relevant facts such as proof of a fault ground or wildly uneven earning capacities of the parties, disparity in business acumen (the ability to make money) or disparity in health, custody of children or separate property estates, and other factors.

You can agree to whatever division you want and the court will not disturb that agreement. While each case is different, in general, pension funds are divided in the following manner: The amount to be divided reflects the value of pension funds as if the employed spouse had stopped working on the day his or her divorce decree is signed. Next, that amount is multiplied by the number of months a couple was married, divided by the number of months a working spouse paid into a pension plan. This final amount is considered community property and subject to division.

While retirement plans subject to ERISA are divisible through a QDRO, in general, a qualified domestic relations order can be used in regard to the following:

  • 401(k) accounts
  • Deferred pension
  • IRAs
  • Stock options
  • Military pension plans
  • Federal employee and civil service retirement plans
  • State of Texas pension plans
  • County pension plans

Filing A QDRO With You Ex-Spouse's Benefits Plan Administrator

When submitting the draft QDRO to the plan administrator, the administrator will review it and determine if it is in compliance with ERISA and the plan document. When a QDRO is submitted, it should include your full address, the full address of your ex-spouse and the address of the employer who sponsors the plan. You will be required to include your Social Security number, as well as that of your ex-spouse, the plan identification number and the plan's name.

The division of pension funds can be complicated and confusing. If you have questions about whether you are eligible to receive a portion of your ex-spouse's retirement funds, contact Houston divorce lawyer Leonard M. Roth today to schedule an appointment and learn how I can help you.