Everything You Need to Know About Dividing Retirement Plans In A Divorce (part 2)

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Pension plans are complex assets that must be divided through the use of a Qualified Domestic Relations Order.  Many spouses have a divorce judgment which provides for a division of the pension plan.  However, since payments from the plan do not commence until the participant spouse retires, many people failed to obtain a QDRO subsequently to receiving their divorce judgment.  This oversight creates many issues down the road as demonstrated below.

Problem 1. 

The Judgment provides that each spouse shall receive one-half community share of the plan of which the husband is a participant, but does not provide the monthly amount each spouse will receive.  The spouses parted way following their divorce, and years later, Husband retires and starts to collect the full amount of the benefits without accounting to Wife for her share.

If the parties had executed a QDRO, they would have been able to avoid this problem by submitting the QDRO to the Plan before Husband retires.  Upon Husband’s retirement and election to start receiving benefits, the Plan would simply disperse to Husband and Wife their respective share of benefits.

However, in this scenario, Wife now has to return to Court to seek an order determining the amount of benefits due to her from the Plan including the benefits that Husband received that should have been dispersed to Wife.  Assuming Husband received $20,000.00 of benefits that should have been paid to Wife, not only must Husband pay back the $20,000.00, he also owes a ten percent interest on the sum.  Further, if Wife has low income, Wife can also seek to have Husband pay her a portion of her attorney’s fees.

The lesson here is that if you have a pension plan in your divorce proceeding, you must immediately obtain an QDRO following the entry of judgment in your case.  Without the QDRO, the Plan will not make the payments set out in the divorce judgment and anticipated by the parties.  In the scenario set forth above, Husband ended up paying thousands of dollars more that Wife’s share of the benefits simply because the parties did not obtain a QDRO before he retires.

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