PHAM & CLOVES, PLLC

Retirements Up For Grabs

A common issue in a divorce is how retirement benefits divided are. Since Texas is a community property state, some or all of a spouse’s retirement account is subject to a one-half community interest. That is, if the spouse with the account began contributing to the account after the marriage, then the entire account is subject to a one-half community interest. If the account was instituted prior to the marriage, then the account is subject to division as to the amount contributed during the marriage only.

Retirement accounts are divided by the agreement of the parties through negotiation or by order of the court. That is the first level of division. The second level of division is with the actual plan administrator through a court order.

If the retirement vehicle (type of account) is a qualified plan” under ERISA (Employee Retirement Income Security Act of 1974) and the Internal Revenue Code Section 401(a) it eligible for favorable tax treatment and the benefits are subject to division by a divorce decree through a Qualified Domestic Relations Order or QDRO (pronounced “quadro”). A QDRO is separate order signed by the divorce court ordering the asset’s division according to the terms of the final decree.  A QDRO can be signed by the court at the same time as the final decree is signed or even thereafter.

QDROs need to contain specific language in order to be enforceable and the plan administrator will need to approve any order submitted. This can take several weeks. Some plan administrators publish their own QDRO for use by family law attorneys. This speeds the process and can reduce the fee for the QDRO. There are companies that specialize in drafting QDROs and the price for this service is comparable to a family law attorney drafting it. Sometimes it is just a matter of choice.

The contents of QDROs are generally the same. They must contain plan identifiers, the action requested, the percentage or amount subject to division, contingencies (if Payee dies before distribution, if Participant dies, etc.). Certain retirement systems have special requirements and require special language in the QDRO. For example, if a participant is an employee of the railroad or a local or state governmental agency or if the particular plan is a private retirement plan with a defined contribution or undefined, there are special QDRO requirements.

If you are unsure if your retirement plan will require a QDRO, simply contact the administrator of the plan for that answer. If you are contemplating a divorce and you have retirement benefits and are unsure how they should be divided, contact a Qualified Domestic Relations Order Lawyer at Veritas Legal Group, PC by calling 713-492-0337 to schedule an appointment for a consultation. Or, simply fill out online contact form and a West Houston Family Law Attorney will contact you within 24 hours. Remember, dividing retirement accounts can be tricky and time consuming. A consultation with an attorney will help remove the mystique of dividing such an asset.