Over the course of your career, you’ve been paying close attention to your retirement or pension plan and that careful attention promoted its steady growth. Or perhaps you are a homemaker who bused the kids and took care of the family home, all while supporting your spouse’s career choices and relying on that spouse’s pension or retirement plan for the future. Maybe you are one of those couples with multiple pension or retirement plans. Do you or your spouse have one of the following?
- 401(k) plans
- 403(b) plans
- Profit-sharing plans
- Pension plans
- Employee stock ownership plans (ESOP)
- Thrift and savings plans
- Roth and educational IRAs
- TIAA-CREF plans
- 457 plans
- Defined benefit plans, including securing QPSA or QJSA benefits for nonparticipant spouses
- Simplified Employee Pension plans (SEP)
- Simplified Employee Pension Individual Retirement Arrangement Plans (SEP IRA)
- Top hat plans, SERPs, Rabbi trusts and other non-ERISA plans
- Military Retirement System plans
- Federal Employees Retirement System (FERS) plans
What is to happen to this nest egg after your divorce? There is a good reason why you or your employer transferred the plan management to a professional investment firm or plan administrator. It can be a monumental task and at times a daunting one. Now imagine trying to evaluate this asset on your own in your divorce case. Do you secretly hope to walk away with your entire plan because you started it well before the marriage? You should know that any appreciation on a premarital asset during the marriage constitutes a marital asset and thus is subject to the property division in a divorce case. 23 Pa.C.S. § 3501. Did your spouse eliminate you as a beneficiary on his or her IRA in anticipation of a divorce? Have your spouse’s pension or retirement records suddenly vanished from the file cabinet? Have you borrowed against your retirement during the marriage? The rules of retirement evaluation are strict and convoluted.
“Defined benefit retirement plans
(1) In the case of the marital portion of a defined benefit retirement plan being distributed by means of a deferred distribution, the defined benefit plan shall be allocated between its marital and nonmarital portions solely by use of a coverture fraction. The denominator of the coverture fraction shall be the number of months the employee spouse worked to earn the total benefit and the numerator shall be the number of such months during which the parties were married and not finally separated. The benefit to which the coverture fraction is applied shall include all postseparation enhancements except for enhancements arising from postseparation monetary contributions made by the employee spouse, including the gain or loss on such contributions.
(2) In the case of the marital portion of a defined benefit retirement plan being distributed by means of an immediate offset, the defined benefit plan shall be allocated between its marital and nonmarital portions solely by use of a coverture fraction. The denominator of the coverture fraction shall be the number of months the employee spouse worked to earn the accrued benefit as of a date as close to the time of trial as reasonably possible and the numerator shall be the number of such months during which the parties were married and not finally separated. The benefit to which the coverture fraction is applied shall include all postseparation enhancements up to a date as close to the time of trial as reasonably possible except for enhancements arising from postseparation monetary contributions made by the employee spouse, including the gain or loss on such contributions.” 23 Pa.C.S. § 3501(c).
To what portion of that value is your spouse entitled? Can the court allow that spouse to take over your pension or retirement account? Should that spouse even get anything if he or she committed adultery or other marital misconduct, such as physical or psychological abuse? In Pennsylvania, your marital estate is divided equitably (i.e. fairly but not necessarily 50/50) and without regard to any marital misconduct. There is a statutory list of factors that the court will consider to arrive at that equitable split. 23 Pa.S.C. § 3502. And the sources of income of both parties, including retirement, is among those factors.
How can your spouse’s retirement account broker refuse to cut you a check despite your spouse specifically consenting to it? It’s because in most instances, you may not get cash as a portion of your spouse’s pension or retirement. A federally regulated qualified domestic relations order (QDRO) is often needed to divide a retirement account. (See http://www.irs.gov.) Depending on the type of plan involved, there are frequently specialized procedures and documentation that may be required also. What about the tax implications for you, if any, once you receive a portion of your spouse’s pension or retirement account? In addition, are there any statutory penalties for an early withdraw of the funds from your spouse’s retirement account in order to create your portion? Who is paying those? Can you get all of this done and over with before the divorce is finalized? The court, upon the request of either party, may at any stage of the proceedings enter an order providing for an interim partial distribution or assignment of marital property. 23 Pa.C.S. § 3502(f).
We know what questions to ask and we know the answers. If we do not have the answers right away, we know where to find them. Our Pittsburgh-based law firm has been in business for over 15 years and has represented over 1,000 clients, including professionals and their spouses in an extensive diversity of complex family law matters. We are lucidly aware of the issues that arise in these cases and the valid concerns that you have. Not only are we diligent in securing an accurate pension or retirement account evaluation, but we pursue the one that best serves our client’s interests. We work with a professional team of valuation specialists, forensic accountants, and other professionals, whom can assist you and us in determining the value of the account that is most precise and most favorable to your interests. Rest assured, we will first attempt an amicable settlement and if necessary, aggressively litigate, for your fair share. We know and appreciate that you want to secure your financial future and enjoy your retirement years.