Dividing Retirement Benefits in Divorce

Posted on January 31, 2012 in Divorce, Family Law

One category of assets that causes much confusion for clients in the context of dividing property and debts in a divorce action is retirement benefits. The term “retirement benefits” includes defined contribution plans such as 401(k) plans and profit sharing plans, as well as defined benefit plans such as pensions.

Section 20-107.3(G) of the Code of Virginia addresses how these benefits are to be divided: “Upon consideration of the factors set forth in subsection E, the court may direct payment of a percentage of the marital share of any pension, profit-sharing or deferred compensation plan or retirement benefits, whether vested or nonvested, which constitutes marital property and whether payable in a lump sum or over a period of time. The court may order direct payment of such percentage of the marital share by direct assignment to a party from the employer trustee, plan administrator or other holder of the benefits. However, the court shall only direct that payment be made as such benefits are payable. No such payment shall exceed 50 percent of the marital share of the cash benefits actually received by the party against whom such award is made. ‘Marital share’ means that portion of the total interest, the right to which was earned during the marriage and before the last separation of the parties, if at such time or thereafter at least one of the parties intended that the separation be permanent.”

But, not all retirement benefits are created equal. For instance, although most types of retirement benefits are divided using a court Order called a Qualified Domestic Relations Order (“QDRO”), the content of those QDROs differs for defined contribution plans and for defined benefit plans when the owner of the retirement benefit is (or was) an employee of a private company. On the other hand, the retirement benefits of federal employees are divided by a court Order called a Court Order Acceptable for Processing (“COAP”). The retirement benefits of military personnel (retired or active duty) are divided by a different type of Order. Over the course of the next few posts, I hope to shed some light on thisvery complicated area of divorce law.