You're getting a divorce. The house, the bank accounts, the cars and even the family furniture have already been divided. You assume, therefore, that all property and entitlements have been divided. Correct? Not necessarily.
Any individual faced with divorce should be aware of how intangible property rights, such as pension benefits, are affected. This is often, after all, the most valuable asset in the marriage. Here's a look at how the law deals with this important benefit:
Pensions Pension benefits, both vested and nonvested, available to either party are considered marital property subject to distribution in a divorce. In dividing this asset the Court may award the entire pension to the employee/spouse and order him/her to buy-out the nonemployee/spouse's interest. Alternatively, the Court may divide the plan itself between the parties assigning each a percentage interest which is paid out upon distribution of the pension benefits at retirement.The Courts appear more inclined to order a buy-out at the time of the divorce since this method avoids the possibility of ongoing court involvement until the benefits are received at retirement. Regardless of which method of distribution is used, the pension plan must initially be valued. Typically, only those pension benefits that are attributable to the employee/spouse's employment during the marriage up until the divorce action is initially filed are subject to distribution. As in most matters surrounding a divorce, however, the court has the discretion to order a different valuation in light of the unique circumstances of each case.
To facilitate the division of pensions, Congress has passed a law requiring that pension plans allow a distribution to the divorced spouse based on a percentage of the monthly benefits payable to the employee/spouse. The law allows the entry of court orders called Qualified Domestic Relations Orders (QDROs). These orders, when properly entered by a court, require the administrator of a pension plan to send pension checks not only to the employee, but also to the employee's former spouse. The court, however, cannot order a pension check to be written before the employee is entitled to the pension benefit, nor can the court change the total amount of the pension that is due. The court can, however, direct that when an employee is eligible for a pension (even if he or she has not yet retired and is not drawing a pension), checks representing the percentage awarded by the court be sent to the employee's former spouse.
The above serves as only a brief overview of how the court handles pension benefits in divorce actions. It is imperative that your attorney have the pension correctly valued and, if applicable, make sure the QDRO complies with federal law and is properly executed. If not, you may be losing out on benefits you are entitled to and may encounter difficulties in dealing with the pension plan administrator long after the divorce has been finalized. As stated above, this benefit may be one of the largest assets of the marriage and should be given proper consideration in finalizing your divorce.
