Article: Family Law

Divorce – QDRO’s and Retirement

By |Published On: May 10th, 2022|Tags: |

Dividing financial assets in a divorce can be stressful and complicated. A couple’s most valuable assets are often their retirement accounts.

As a general rule, under Georgia law, all retirement contributions made by both spouses during the marriage are subject to equitable division in a divorce.

The first step is to calculate the marital share of retirement subject to equitable division. This can often be challenging since there are many different types of retirement plans, such as pension plans, 401(k)s, Roth IRA, SEP IRA, HSA, ESOPs, and 457(b) plans, and each plan may have different rules on how contributions are made and when they vest. Once the marital amount is calculated, the next step is to structure the division of the marital share of retirement interests.

We will review your retirement accounts to determine the marital share and make recommendations on how to best structure the property division to put you in the best possible financial position to move on.

The Division Process

In order to divide or transfer retirement interests in a divorce, parties will often need to obtain a separate order to complete the transfer and avoid serious tax consequences. The type of retirement interest you or your spouse own will determine the type of order or the forms required to transfer the retirement interest. Assignments of retirement interests must comply with both state and federal law, namely The Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986. ERISA established minimum standards for retirement and healthcare plans in the private sector to protect plan participants.

Most private employer retirement plans are ERISA qualified plans. The two primary types of qualified retirement plans are defined benefit plans (e.g.: pension) and defined contribution plans (e.g. 401(k)). To transfer an interest in a qualified account you will need to submit a domestic relations order to the plan. A domestic relations order creates or recognizes the non-employee spouse’s share of retirement or assigns them the right to receive all or a portion of the benefits of the retirement plan, without tax implications or early withdrawal fees on the transfer. A domestic relations order for the transfer of an interest in an ERISA plan that has been approved by a plan administrator is called a qualified domestic relations order (QDRO).

The transfer of certain retirement interests in qualified plans often takes one of two approaches, shared payment or separate interest. The separate interest approach typically creates a separate account for the non-employee spouse so the retirement benefits will be paid at a time and in a form different than that of the employee. For a shared interest approach, the non-employee spouse receives a share, or portion, of the employee’s right to payment when the employee becomes eligible to begin receiving benefits. The difference is based upon the identity of whose life expectancy the non-employee spouse’s payments are based. The purpose or intent for which the retirement benefits are being divided will determine which approach should be used.

How We Can Help

Every case is unique and the best way to divide retirement accounts will depend on many factors, including the type of plan, the nature of the retirement benefits, the parties’ needs, and the intent of the parties or the court in making the transfer. Orders that transfer retirement interests must also be drafted with extreme care and attention to detail to ensure they follow federal and state law and the plan requirements and effectuate the intent of the parties.

We have the experience necessary to help you move on in the best possible financial position. Contact us today at (770) 536-0202 to schedule a confidential consultation.

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