Pensions—Domestic Relations Orders

Pensions—Domestic Relations Orders

Upon dissolution of marriage, each spouse will have a community property interest in the other spouse’s retirement funds (401-k, IRA, pension, etc.). The community property interest will be in the proportion of time the length of the marriage bears to the period of time the spouse was earning the retirement funds. For example if a spouse began earning his or her retirement in 1980, married in 1985, and divorced in 1990, the community property interest is 50% (5 years of marriage while earning the retirement funds for 10 years). Assuming, for argument’s sake the spouse also quit working in 1990, the other spouse has a ¼ interest in the retirement funds.

A separate court order, a "Qualified Domestic Relations Order" ("QDRO"), is typically required to divide the community interest in retirement funds. It must comply with Internal Revenue Service requirements (in order to avoid taxation upon division), as well as the particular requirements of the plan administrator. If the order divides an interest in a municipal or state (i.e., CalPERS, STRS, etc.) pension it is referred to by the I.R.S. as a "Domstic Relations Order" ("DRO").

Obtaining a QDRO is a complex process. Consult an experienced family law or tax attorney for assistance in obtaining a QDRO.

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