Going through a divorce can be a challenging ordeal. Not only is it extremely stressful trying to figure out who gets what, but when retirement benefits are at stake, the whole process becomes that much more tedious.
Trying to figure out what interest your spouse can acquire in your retirement benefits and how to protect those interests can be a complicated issue, especially when taking into account the specific laws and the numerous retirement plans available.
That is why, in this post, we will dive into the complexities of retirement benefits, how they are divided in a divorce, and how the law offices of DeShon Laraye Pullen PLC can help you.
Arizona Law and Community Property
Arizona is considered a community property state. This indicates that generally, spouses share equal ownership of anything that is purchased, acquired, earned, or paid for during their marriage. So even if one spouse paid for some property, or it is only their name on a title, if it was acquired during the marriage, then most likely, both spouses own it equally.
According to these Arizona laws, retirement assets, including pensions, are treated the same way as other community property, meaning that in a divorce, they are divided equitably between the spouses. However, in order to figure out how it will be shared, you need first to figure out the type of retirement plan you have.
Types of Retirement Benefits
Even though there are many types of private pension plans, the two most common types of retirement accounts include a “defined benefit” plan or a “defined contribution” plan.
Defined Contribution Retirement Plan
This is a plan where you invest money that grows over time, such as a 401(k) or an IRA. It does not promise a specific dollar amount at retirement, but rather employees or employers can contribute to the plan, and those contributions are invested on behalf of the employee. These plans fall and rise based on the investment’s performance.
In Case of Divorce
In cases where you have a defined contribution retirement plan, if a divorce occurs, you are entitled only to the value of the account.
Defined Benefit Plan
A defined benefit plan is a system where you invest money into a program that will provide you with a specific benefit at a certain age, such as a pension. This benefit can be a dollar amount, or it can be based on a computation that takes into consideration your years of service and your salary. Often, these defined benefit plans make up 10% of plans in which employees are enrolled in.
In Case of Divorce
If you have a defined benefit plan, you may be entitled to the value of the account in addition to or in place of any monthly pension payments. However, this will depend on the terms of the plan.
Division of Retirement Benefits
When a married couple divorces and one spouse is enrolled in a private pension plan, the spouse that is not enrolled can prepare a special order referred to as a Qualified Domestic Relations Order (QDRO) to create a legal right into the retirement plan proceeds.
Even though state law usually governs divorce proceedings, retirement plans are governed by federal regulations known as the Employee Retirement Income Security Act (ERISA), which sets up the requirements for a QDRO. And when these requirements are met, the QDRO will direct the plan administrator how to split up the community property portion of the retirement benefit accounts. Simply put, retirement plans must comply with federal laws, and even the judge in a divorce proceeding cannot order the plan administrator to do anything that is not allowed in the plan.
In the alternative, to avoid invading retirement plans, if both parties agree to it, the non-employee spouse can accept other assets that are equal in value to the retirement benefits they would have received. However, it is important to discuss all of these options with your attorney before proceeding with one course of action over another.
Qualified Domestic Relations Order
To have your benefits paid out, your Qualified Domestic Relations Order must meet all the requirements. At a minimum, these QDROs must include the following:
- The name of the member and their last known mailing address
- The name of each alternate payee covered by the Order and their last known mailing address
- A method that determines the amount of the member’s severance, survivor, or retirement benefits to be paid by Arizona State Retirement System (ASRS) to each payee covered by the Order
- The period or the number of payments to which the Order applies.
During the divorce proceedings, both spouses will identify which assets they want to be divided, including the retirement benefits. If you are awarded part of your former spouse’s retirement account, the court will issue a QDRO, which will then be submitted directly to your former spouse’s retirement plan administrator. If the QDRO is accepted, the plan will let you know right away. If the plan rejects the QDRO, they will provide you with a clear explanation as to why and what steps you need to take to get it approved.
Other Retirement Plans
Qualified Domestic Relation Orders are specifically for private ERISA plans. If you have a government-sponsored retirement plan such as a Federal Employee Retirement Systems (FERS) or the ASRS, these are handled by a different process called the Court Order Acceptable for Processing (COAP). That is why it is so crucial to discuss your retirement plans with an experienced attorney who understands the differences between each of them and which laws apply.
How Can a Family Law Attorney Help?
If you are heading towards a divorce, you need a knowledgeable lawyer on your side. Dividing retirement benefit accounts can be a very tedious and complicated process. Not only is it imperative to ensure that the special orders are filled out correctly, but that they are also in agreement with the numerous laws and plan requirements.
For these reasons, if you are looking into dividing your retirement benefits, do not wait any longer. Contact an experienced family law attorney today by calling the law offices of DeShon Laraye Pullen PLC at 602-252-1968. Let us provide you with the personalized legal representation that you need during this difficult time.