More and more these days, retirement benefits can be some of the most valuable of a couple’s assets. Whether those retirement benefits are held in the form of pension rights, an interest in an employer’s profit-sharing arrangement, or in a qualified 401(k) or 403(b) plan, the values must be considered in determining an equitable division of the couple’s property. In Florida and virtually all other states, only the portion of the retirement benefit that accrued during the marriage is subject to equitable distribution.
Valuation Issues Related to Retirement Benefits
There are several problems in dividing retirement benefits:
- In most instances, the couple’s respective interests cannot be liquidated, since the pension holder or retirement plan participant may not be eligible to receive any retirement benefits until a date in the distant future. Entitlement to retirement benefits is controlled both by the terms of the respective retirement plan documents and by federal law (ERISA and the Internal Revenue Code). Those federal laws are not trumped by a divorce decree.
- Depending upon the particular plan provisions, the holder’s interest may be subject to significant investment risk.
- Entitlement to some retirement benefits may be limited, or even terminated, by the plan participant’s death.
Qualified Domestic Relations Order
Equitable distribution of the couple’s interest in retirement funds is typically accomplished through a Qualified Domestic Relations Order (“QDRO”). A QDRO is a court order directing the retirement plan or fund administrator to distribute or segregate a portion of the account for the benefit of the plan participant’s soon-to-be ex-spouse.
That portion can be determined in two ways: (a) through a negotiated agreement between the divorcing partners, or (b) in contested cases, through findings made by a judge following an evidentiary hearing. If the matter has to be litigated, each party typically provides expert testimony as to the appropriate valuation. The judge hears the evidence and makes a ruling that, if not appealed, is binding upon both parties.
Whether through a negotiated settlement or a court-determined valuation, the QDRO is then delivered to the retirement fund’s plan administrator, who segregates the fund pursuant to the QDRO’s terms. Generally speaking, when the employee becomes entitled to retirement benefits, an appropriate distribution is also made to the former spouse.
Beller Law, P.L. – Trusted Authorities on Florida Divorce & Family Law
As with any settlement agreement, great care should be taken in the negotiation process and in the drafting of appropriate documents in a divorce. One must often weigh numbers of competing interests to come to a successful resolution of this complicated side of family law. The family law attorney at Beller Law, P.L. are widely recognized as experienced and knowledgeable in all divorce-related matters under Florida law, including the appropriate use of QDROs. If you would like to speak with one of our lawyer about your divorce or other family law issue, please call 904-288-4414 or request a consultation online today.