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How to handle ERISA plans in divorce

On Behalf of | Dec 28, 2017 | Divorce, Firm News |

When a Nebraska couple gets divorced, retirement accounts may be divided along with other marital property. If an account is covered by the Employee Retirement Income Security Act, it will have to be divided under the terms of a Qualified Domestic Relations Order. Accounts that may require a QDRO prior to being divided include a 401(k) or employer-sponsored pension plan.

However, pension plans for government employees or members of the military are covered by different rules. Ideally, a QDRO will be drafted by an attorney who has experience with such documents. If an attorney is not familiar with the QDRO, it could result in delays that may cost an individual more money. It is also increasingly likely that the attorney could make a mistake that may be costly in the future.

Whether money in a retirement account is eligible for division depends on when the money was obtained. If there were funds in a retirement account prior to the marriage, those funds may not be included in a division calculation as it may be considered separate property. The timing of the payments may also vary depending on plan administrator preferences or other factors such as the type of plan that a spouse contributed to while working.

At the end of a marriage, it may be necessary to divide funds inside of a retirement account if they are deemed to be marital property. An attorney may be able to review the source of the funds and other records to help an individual determine if any portion of a pension or 401(k) may be separate property. In some cases, a prenuptial agreement or a similar arrangement may determine whether retirement funds are to be divided as part of a divorce settlement.