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Careers
Employee benefits are part of a group of assets that can be treated as marital property when determining the amount of monetary award and the assets and income available to family members for support. The value of employee benefits and how they are treated depend on a variety of factors including the value of the benefit at a particular point in time, the type of benefit and its terms and conditions, any applicable laws, and tax consequences of that benefit. As it pertains to divorces, important retirement benefits that you should be aware of include Qualified Domestic Relations Orders (QDROs) and 401(k)’s.
Qualified Domestic Relations Orders (QDRO's)
A Qualified Domestic Relations Order, or QDRO, is a judgment by the court that assigns some or all of a pension participant’s benefits to his or her dependant (“alternate payee”), i.e., spouse, former spouse, or child, in order to satisfy family support or marital property obligations. If a dependant is a minor or is legally incompetent, the QDRO can require payment to a third-party such as a guardian or trustee. A QDRO may assign all or part of the retirement benefits to a dependant (“alternate payee”) whether or not the benefits have vested or accrued when the order is passed. Overall, the QDRO provision were enacted to protect those who, as a result of divorce, might not receive the income they expected to receive during their retirement.
QDRO rules only apply to tax-qualified or nonqualified retirement plans. Therefore, any plans not subject to ERISA, such as individual retirement accounts or federal, state or local government plans, will not have QDRO rules applied to them. The benefits from a pension are generally paid to the alternate payee when the benefits would be paid to the participant except in two instances when the benefits would be paid earlier: (1) if the participant is eligible to benefit receipts, benefits may be order to be paid at any time the participant would b eligible or (2) if the participant is still employed, benefits may be paid on or after the date when the participant attains or would have attained the earliest retirement age under the plan. If a participant dies before retirement, all rights of the alternate payee may end under the QDRO, except survivor benefits. A “surviving spouse” is someone who is married to a participant for at least one year as of the date of the participant’s death or the annuity starting date, whichever is applicable. A former spouse who is an alternate payee will only receive benefits, however, if the QDRO designates the former spouse as the surviving spouse for purposes of survivor benefits.
401(k)'s
A “defined contribution plan” is one that provides individual accounts for each participant and provides benefits based on contributions to the participant’s account, the effects of investments of that account (such as income and expenses), and allocation of whatever is forfeited from other participants’ accounts. An example of a defined contribution plan is a 401(k) plan.
Further Information on Division of Property:
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