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Orders Dividing Retirement Plans

Orders Dividing Retirement Plans

Many difficult financial issues arise when a couple undergoes a divorce.  At Kleintop & Luria, LLP, the firm’s attorneys handle a wide variety of complex issues relating to divorce.  For many divorcing couples, their primary assets are the equity in the family home and the accumulated value of their retirement plan(s), including IRAs, 401k plans and pension plans.  Few family law attorneys in Honolulu, Hawaii prepare orders dividing retirement plans in a divorce, but at Kleintop & Luria, LLP, the firm’s attorneys have particular expertise in the division of retirement plans.

Equitable Distribution at Divorce

Hawaii is an equitable distribution state, which means that the court divides the property between the spouses “equitably” or fairly at the time of divorce.  The retirement benefits of a qualified retirement plan are considered to be marital property, since the benefits accrued as a result of the efforts of both spouses during the marriage.

Qualified Domestic Relations Order

Qualified Domestic Relations Orders (QDROs) are court orders, judgments or decrees that create or recognize the existence of another person’s right to receive, or assigns to an alternate person the right to receive, all or a part of the benefits arising under a retirement plan.  The courts utilize QDROs when conducting an equitable distribution of the retirement benefits of the parties.

QDROs apply to employee benefit or pension plans subject to the Employee Retirement Income Security Act (ERISA), a federal law governing private sector pensions.  Specifically, ERISA is a federal statute that provides standards for private sector pension plans, including rules regarding federal income tax effects of transactions relating to employee benefit plans.

Additional types of retirement benefits QDROs apply to include the following:

  • Defined benefit and defined contribution plans
  • 401ks, thrift savings plans, and ESOPs
  • Certain profit-sharing and money-purchase plans

Various factors must be considered when determining the best way to divide pension benefits in a QDRO.  Some of these factors include considering the type of pension plan at issue, the nature of the participant’s pension benefits, and the particular reasons for dividing the benefits, such as to provide support payments to the alternate payee (spouse, former spouse, or child) or to divide marital property during a divorce.

For further information regarding QDROs, please see the U.S. Department of Labor’s website.

Military Retirement Benefits and Federal Civil Service Retirement Plans

The Uniformed Services Former Spouses’ Protection Act (USFSPA) governs the calculation and division of military benefits upon divorce.  With respect to federal service retirement plans, however, governmental plans, including the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS), are exempt from ERISA and are regulated under different federal rules.  Rules regulating the division of federal civil service retirement benefits, for example, can be found under various sections of Title 5 of the United States Code.

For more information regarding court-ordered benefits for former spouses of federal employees, please see a pamphlet issued by the U.S. Office of Personnel Management.

If you are contemplating a divorce and either or both spouses have a retirement plan, a qualified, knowledgeable family law attorney can assist you.  If you need assistance with dividing retirement plans, contact Kleintop & Luria, LLP today for assistance.

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