About Pension/Retirement Asset Division and QDROs
Because retirement assets (such as your pension plan) are among the largest marital assets shared, those divorcing will likely face pension valuation and division as part of the divorce agreement. And since these assets, both public and private, are subject to federal law, there are certain tax considerations in order to comply with IRS tax code.
In addition to retirement plans private companies offer employees, many government employees and civil servants have a pension plan among their retirement benefits including retirement plans for the New York City Police Department (NYPD), Fire Department of New York (FDNY), Emergency Medical Technicians (EMT) and other civil servants and unionized employees such as state employees, local government employees, school district employees, employees of state and local public authorities, and employees of other government corporations.
Once an agreement concerning the division of retirement benefits has been reached between you and your spouse, that agreement will be included in your divorce agreement. However, including retirement benefits division as part of your divorce agreement alone does not establish a legal right for an alternate payee (e.g., former spouse) to claim benefits, even after the divorce is final.
For an alternate payee to receive retirement benefits, there must be a Court approved Qualified Domestic Relations Order filed, known as a “QDRO”. A QDRO creates or recognizes the existence of an alternate payee’s right to receive some portion of a retirement asset. Accordingly, it is paramount that your attorney understands how to successfully handle retirement benefit division and the preparation and inclusion of a QDRO in divorce agreements. Often attorneys engage other lawyers or a firm like ours to assist in this process.
At Erin K. Colgan Law we have deep experience in pension valuation and the division of retirement assets during divorce. In fact, we frequently work with other law firms and attorneys to provide them with pension valuations, QDROs, and related guidance for their divorcing clients.
When you retain Erin K. Colgan Law to represent you in your divorce, you can be confident that we have the skills, knowledge and experience you need. And since every retirement and pension plan is different, every QDRO is unique, the building of a QDRO requires knowledge and skills in the many types of pensions and public and private retirement benefit plans, including military, federal, state, and local pensions, 401 (k)s, and ERISA plans. Our staff prepares QDROs that are conforming and accurate to ensure that reviews with plan administrators run smoothly.
When to File Your QDRO
A QDRO is a very specific order that should be filed in a timely manner to be effective. The language used within the QDRO has both the ability to support and ruin the ability of a spouse to collect on their ex-spouse’s 401(k).
The adage “better earlier than later” applies when it comes to QDROs. It is unfortunately common for those already divorced to have agreed to pension division in the divorce agreement, but not prepare or file a QDRO. Without the QDRO, the alternate payee is denied a true legal right to receive benefits. In these cases, a QDRO may be more time consuming and difficult to effectuate. However, it is required if assets are to be divided as per the divorce agreement.
For questions or more information about our pension valuation and QDRO services, phone us at (718) 981-5505.