Dividing Retirement Accounts Upon Divorce

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Dividing Retirement Accounts Upon Divorce

Other than real estate, a retirement account is usually one of the largest assets people own.  In Arizona, if the retirement account was accumulated during the marriage, in the event of a divorce, it will be considered a marital community asset subject to equitable division by the court.  Once it is determined how much of the retirement account the other spouse is entitled to receive, it needs to be divided.

The task of dividing the retirement account falls to the retirement account’s plan administrator.  In order for the plan administrator to distribute the appropriate amount of money to the other spouse, they will need a court order called a Qualified Domestic Relations Order (“QDRO”).   A QDRO is an order from the divorce court to the plan administrator telling them how much of the retirement account to give to the other spouse.

The division of marital property in a divorce is governed by state law, but retirement plans are governed by Federal laws known as ERISA (Employees Retirement Income Security Act) and REA (Retirement Equity Act). The division of retirement accounts must therefore comply with Federal law.   In simple terms what this means is that a State Court Judge in a divorce cannot order a plan administrator to do anything not allowed by the plan.  There is actually a provision in ERISA that states: “The order must not require a plan to provide an alternate payee or participant with any type or form of benefit, or any option, not otherwise provided under the plan.” The QDRO must comply with the plan’s specific provisions.

There are some retirement plans not governed by ERISA and REA.  Some examples are: The Military Retirement System, Civil Service Retirement System, the Federal Employees Retirement System and the Railroad Retirement System. It is obviously important to understand the type of retirement plan you are dealing with and know the laws that govern it.

Dividing retirement accounts can be a complicated and time consuming process. It is crucial to make sure the QDRO is done properly and in compliance with the plan’s requirements.  Hiring a qualified person to deal with the plan administrator and prepare the QDRO can make things a lot easier.

Daniel J. Siegel is a Certified Specialist in Family Law by the State Bar of Arizona.  For help with any family law related matter, call Daniel J. Siegel, P.C. at 602-274-1099.

This article is for informational purposes only. The information contained herein is not legal advice, nor is it intended to be.  Readers should not act upon information contained herein without first seeking the advice of a qualified attorney. Please contact Daniel J. Siegel, P.C. with any questions, 602-274-1099

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