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Figuring Out How Your Pension Could Be Paid Out After Divorce

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The differences in how asset division works in divorce highlights why it is so important to work with an experienced divorce attorney so that you fully understand how to weigh the pros and cons of negotiating different assets in a divorce. Below, we explain how the division of a pension plan as an asset in particular works differently than, for example, a 401(k) plan, to highlight this point:

Equitable Distribution & Where the QDRO Fits In

In Florida, the law is based on equitable distribution of marital assets and liabilities, meaning that in event of a divorce proceeding for the disposition of assets, the court begins with the premise that distribution should be equal in this area; unless there is a justification for any unequal distribution.

Let’s take for example how a pension is paid out after divorce, where a spouse is to receive 50 percent of what a pension is valued at (similarly to all other assets and liabilities because it is split by way of equitable distribution). To ensure that pension benefits are paid based on equitable distribution, a Qualified Domestic Relations Order (QDRO) is filed with the court and served on the pension plan’s administrator when the final judgment of divorce is filed. This judgment directs the administrator on how the pension benefits should be distributed when those benefits go into pay status. However, keep in mind that pension benefits are distributed differently from say 401(k) benefits because – unless a pension is in pay status at the time the final judgment of divorce is entered – 401(k) benefits can be immediately distributed, while a pension is usually unknown.

How Pension Benefits Are Calculated

Pension benefits are based on annual income earned and years of service. As a result, the QDRO addresses how your future pension benefits are to be distributed to your spouse based on the number of years you were married and the number of years you were earning credit in the pension plan during the marriage. So for example if you were married for 10 out of 25 years employed and earning credit in the pension plan, the marital portion of the pension benefits that would be subject to equitable distribution would be approximately 40 percent (or 25 divided by 10). Your spouse is entitled to one-half of the marital portion of the pension benefits, which would be approximately 20 percent.

How Pension Benefits Are Administered

It is the responsibility of the pension plan administrator to ensure that the proper portion of the pension is set aside for your ex, effectively creating two separate accounts when they are served with the QDRO. When these benefits go into pay status, your ex receives 20 percent directly from the plan administrator each month and you receive the balance.

Contact Our Florida Divorce & Family Law Attorney for Assistance

Failing to understand how each of your assets work can cause stress later on, but working with an organized, experienced attorney from the outset means that you will go into divorce understanding the ramifications of every decision and make sure that you and your assets are protected. Contact the West Palm Beach family lawyer at the office of William Wallshein, P.A. today to set up a consultation and find out more.

Resource:

nj.com/advice/2020/02/how-will-my-pension-be-paid-out-after-divorce.html

https://www.wallsheinlaw.com/what-is-the-most-common-reason-people-get-postnuptial-agreements-a-discussion-marriages-insurance-policy/

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