All income earned by either spouse during the marriage or domestic partnership is community property - unless the parties entered into a pre or post nuptial agreement that states otherwise. Portions of retirement accounts and/or pension plans, funded from income earned during the marriage or domestic partnership are community property as well. Retirement benefits are often the single most valuable asset to be divided in a dissolution action. It is very important to have experienced and knowledgeable counsel to protect your interests in retirement or pension plans as the division of these plans via a Qualified Domestic Relations Order (“QDRO”)is governed by complicated IRS tax code provisions. At V. Freitas Law, we know how to identify, analyze, and advocate for the correct allocation of retirement and related benefits.
A QDRO is an order that establishes an ex-spouse's legal right to receive a designated percentage of the other spouse’s qualified plan account balance or benefit payments. The pre-marital portion of any retirement account or pension plan is typically deducted from the plan value and the remaining community property portion of the plan is divided by QDRO.
QDROs are used to divide defined contribution plans as well as defined benefit plans. A defined contribution plan (401(k), IRA, 403(b), 401(a) Profit Sharing Plans and 457 Deferred Compensation Plans) is typically divided by awarding the alternate payee a specific dollar figure or specific percentage of the account balance as of a date certain.
A QDRO that divides a defined benefit plan, or pension, can either split the payments made under the plan between the spouses, or divide the participant’s benefit into two separate portions. The split payment QDRO is typically used when one spouse has retired and is already receiving payments. A split payment QDRO specifies a dollar amount or percentage that the alternate payee will receive from each payment made to the plan participant.
A separate interest QDRO divides the marital portion of the plan and gives the alternate payee a separate right to receive benefits under the plan. The alternate payee can elect to receive payments at a different time and in a different form from the plan participant
In every case with retirement benefits, it is important to address whether or not the current spouse will continue to be treated as the participant’s “spouse” under the plan in order to receive survivor benefits. Survivor benefits are payable after the death of the plan participant.