Your Financial Future:
7 Key Questions You Need To Ask BEFORE Your Divorce Is Finalized
To make an intelligent decision on how to divide a pension, find out what kind of pension it is, how it is funded, and how it pays out.
Does your spouse have more than one pension or retirement plan from his or her current or previous job?
Your spouse may be eligible for (or may already be receiving) retirement benefits from any current or previous job. Your settlement must refer to each plan in order for you to get benefits from each. He or she may, for example, have a traditional pension plan and also a 401(k) plan. Both types of plans can be divided at divorce.
Has your spouse worked long enough to earn a legal right to the pension?
Most plans now provide benefits after 5 years of work. However, if your spouse has worked for the federal, state, or local government, you will have to find out about the different rules that apply to those pensions.
Do you know how much your spouse has earned or "accrued" in pension benefits under each plan?
You or your attorney can write to the pension plan administrator to get a copy of his or her most recent annual benefit statement. Or ask the court to order the plan to furnish one. You should also request a summary plan description (SPD), which will describe the key features and rules of the plan. The SPD will tell you if the plan provides for cost of living adjustments.
Do you need to have the benefit valued?
Sometimes the pension is worth more or is more complicated than the amount that appears on the annual statement. You may want to have a pension actuary or an accountant calculate the lump sum present value of the monthly pension.
Do you know what information needs to be in the court order, decree, or property settlement before the pension plan will pay the benefits directly to you?
The court order required to divide a company pension plan is a Qualified Domestic Relations Order (QDRO). As soon as divorce proceedings start, have your attorney contact your spouse’s plan administrator for the QDRO procedures. Each pension plan is different and many companies have developed their own QDRO forms to make it easier for the court and the ex-spouse.
Does the order clearly specify what amount is to be paid to you?
The amount can be stated as a fraction or percentage of the pension. It can be based on the total benefit earned as of the separation date, the date of divorce, the date he or she is eligible for retirement, or the date he or she retires.
Does the order provide for survivor benefits, so that your benefits can continue if your ex-spouse should die first?
Traditional, company pension plans provide a survivor’s benefit of 50% of the amount the spouse received. Ex-spouses can receive these benefits, but they must be specifically included in the order or the benefits may stop when their ex-spouse dies.
by Anne E. Moss, J.D., author of Your Pension Rights at Divorce