Pension accounts and retirement funds that are earned during a marriage are subject to distribution at the time of a divorce. If an employed spouse contributes a portion of his or her earnings to a 401K plan or a company pension, those retirement funds will generally be treated as marital property to be divided between the spouses at the time of their divorce. Knowing how and when to divide retirement accounts is an important legal decision that may have major consequences in valuing the marital estate. A proper distribution of pension funds must also take into consideration the applicable tax ramifications.
Employed spouses may maintain their retirement funds in a wide variety of employer-sponsored accounts, or private, individual retirement funds. These include, for example, defined benefit pension plans, defined contribution benefit plans, money purchase plans. 401K, 403(b), 409A, and 457 retirement savings plans, thrift savings plans, self-invested personal pensions (SIPP), simplified employee pensions (SEP), payroll deduction Individual Retirement Accounts (IRAs), Savings Incentive Match Plans for Employees (SIMPLE IRA), Roth IRAs, Keogh plans, Employee Stock Ownership plans (ESOPs), Salary Reduction Simplified Employee Pensions (SARSEPs), unit linked pensions, unitized with profits pensions, state pensions and other government pension plans. When exploring these various kinds of accounts, a law firm must assess the present and future value of the funds being held; the terms and conditions governing the distribution of funds, including tax consequences for early withdrawal; the transferability and convertibility of the accounts; and any applicable vesting periods or payout policies.
Spouses who wish to divide a pension account as part of their divorce settlement may agree to sign a Qualified Domestic Relations Order (QDRO). A QDRO enables a pension effectively to be divided between two spouses so that each spouse ends up with their own retirement account, and each pays their own share of taxes on the funds withdrawn.
QDROs can often be complicated to prepare, and it is necessary to engage the assistance of experts, such as actuaries, to draft proper QDRO papers. The Law Offices of Mark S. Guralnick routinely deal with the preparation and filing of QDROs and have supervised the preparation of many complicated QDRO documents.