In the majority of jurisdictions, retirement, social security, and pension benefits that are earned during a marriage are considered to be marital assets. Because of this, in the event of a divorce, these types of benefits are treated the same as all other marital property and are divided fairly between the parties unless the spouses have a different arrangement, such as in a prenuptial or postnuptial agreement.
In order for a retirement or pension plan to be split and to obtain pension payouts after divorce, a Qualified Domestic Relations Order (QDRO) must be entered during the property division. It is important to note, however, that a QDRO will not be considered value if it was obtained by:
- Coercion;
- Fraud;
- Deceit; or
- Misrepresentation.
A violation of a valid QDRO by any of the parties may lead to legal consequences.
What Is a Qualified Domestic Relations Order?
Qualified Domestic Relations Orders (QDROs), are specific types of domestic relations orders. QDROs apply to ERISA-qualified retirement plans.
These orders provide for an alternate payee, or individual who receives the retirement benefits. This alternate payee may include:
- A spouse;
- An ex-spouse;
- A child; or
- Another depending.
In order for a QDRO to be valid, it must describe, in addition to other things, the percentage of the retirement plan monies that will go to the alternate payee as well as how that percentage is determined.
What Is Contained in a Qualified Domestic Relations Order?
As noted above, QDROs must contain certain pieces of information in order to be legally enforceable. These requirements are provided in various tax laws and sections of ERISA.
In order for a QDRO to be recognized by a pension plan administrator, it must contain:
- The names and mailing addresses of the retirement plan participant as well as the former spouse who will be receiving distributions, or the alternate payee;
- The amount or percentage of the retirement benefits that are to be paid to the alternate payee from the plan;
- The manner by which the payment amounts will be calculated, if a percentage cannot be agreed upon or determined; and
- Information regarding the particular retirement pension plan to which the order will apply.
If there is already a QDRO in effect, typically, a subsequent order cannot alter the original order without the parties’ consent. In addition, the retirement plan administrator may be subject to various requirements under the QDRO.
The plan administrator has to receive notice of the QDRO and accept and acknowledge their duties under the order.
Are Qualified Domestic Relations Orders Enforceable under Law?
Yes, similar to any other type of court order or legal document, a QDRO is enforceable under state and federal laws. This means that failing to follow the requirements in a QDRO may result in legal penalties for the perpetrator, whether that is a plan participant, alternate payee, or plan administrator.
A violation of any type of court order may result in contempt charges. It may also result in civil liability if the individual’s actions cause losses to the other party.
It is important to note that the non-participant spouse is typically entitled to the same rights as the participant spouse under the plan, including early withdrawal options as well as cost-of-living adjustments.
Is There a Statute of Limitations?
If an individual delays in obtaining their QDRO, they may lose their rights and risk forfeiting all of the benefits that were awarded to them in their divorce. Their rights may be lost if their former spouse does any of the following before the QDRO is submitted to and accepted by the pension plan:
- Retires;
- Remarries;
- Dies;
- Quits or is terminated;
- Withdraws funds from the plan prior to retirement; or
- Takes out a loan that is secured by the plan account.
There are also important things to keep in mind regarding Social Security benefits. An individual may apply for benefits on their ex-spouse’s record, even if they have not retired, so long as they have been divorced at least 2 years before applying.
If the individual waits until full retirement age to apply as a divorced spouse, their benefit will be equal to half of their ex-spouse’s full retirement amount of disability benefit. This also applies for a deceased ex-spouse.
Pension Rights after a Divorce
When dividing benefit pensions in a divorce, the majority of states have held that pensions and retirement benefits that were earned during the marriage are marital assets that are subject to equitable distribution by a court. Pension benefits that accrue, or gain interests after the parties are divorced, however, are not considered to be marital property and, therefore, are not subject to equitable distribution.
If a non-employee spouse requests distribution of an employee spouse’s pension rights before the employee spouse retires forfeits any rights to the increased payments in the future that may accrue based on:
- Increased age;
- Longer service; or
- A higher salary.
How Are Social Security Benefits Divided After a Divorce?
Social security is a United States program that provides support for elderly or disabled individuals. If an individual works, they pay a certain percentage of all of their income to the government in the form of social security taxes.
Once they become disabled or retire, they then receive money from the United States government based upon how much money they paid in social security taxes. If one of the spouses was the primary earner in the household, the other spouse may be entitled to half of that spouse’s social security benefits.
It is important to note that there are certain rules and limitations, including:
- Age: 62 is the age of early retirement. Full retirement begins at age 66 and maximizes at 70. There is an earning cap that comes into consideration, even if someone is collecting on their ex-spouse’s income and not their own;
- If an individual is 62 and divorced they are eligible to file on their ex-spouse’s work record;
- Length of marriage: The marriage must have been at least 10 years. In addition, the couple must have been divorced for 2 years before either spouse will be eligible for the benefits of their ex;
- Amount of benefits: To be eligible for a portion of a divorced spouse’s social security, their benefits must be higher than the other spouses; and
- Surviving spouse: In a situation where a couple was married for 10 years and one of the spouses is deceased, the surviving spouse can collect on the deceased spouse’s benefits. Benefits become available for the surviving spouse once they reach an age of 60, or 50 if the surviving spouse is disabled.
What if I Get Remarried?
Once a spouse gets remarried, they will no longer be able to collect on the social benefits of their ex-spouse.
Will My Divorced Spouse Know I Am Collecting on Their Income?
No, the divorced spouse will not know their ex-spouse is collecting on their income. Collecting on an ex-spouse’s income will not affect how much in benefits their ex-spouse is entitled to.
Do I Need a Lawyer for Assistance with Divorce and Retirement Benefits?
It is common for retirement benefits to be contested during a divorce. If you have any issues, questions, or concerns related to a divorce and retirement benefits, you should consult with a divorce lawyer.
Your attorney can advise you how a divorce will affect your retirement benefits and will be able to explain how the laws in your area work. Your attorney can also represent you during court proceedings to ensure that your interests are protected and you receive the maximum amount of benefits possible.
