The Retirement Pension—Potentially One of the Most Valuable Assets in the Mississippi Divorce

Generally speaking, the marital home and the retirement pension may be the assets worth the most during a divorce, and, in many cases, the retirement pension may actually have more worth than the home. Particularly for women, the “golden-years” of retirement can be fraught with financial uncertainty, making the pension even more important. More than twice as many men as woman have retirement benefits and the benefits for men are nearly always higher than those of the woman. Further, many women spend years putting their spouse through school or raising the children, foregoing their own career only to find themselves facing vastly reduced circumstances during a marital breakup.

The woman’s contributions to her own retirement pension are negatively impacted making it even more important that she have a solid understanding of her husband’s pension. Because the division and distribution of pensions can be complicated, the woman in the divorce may grab at the more immediate need—the marital home—particularly if she still has children at home. Pensions may have much more long-term value but unlike cash in the bank or stocks and bonds, the rights to a pension involve:

  • Classification
  • Valuation
  • Distribution
  • Qualified Domestic Relations Orders
  • Other miscellaneous areas including post-decree increases

Pension benefits earned prior to marriage remain the pension-earner’s separate property however any pension benefits earned during the marriage become community property. A valuation date will be established in order to accurately determine pension benefits. Under a defined benefit plan, the value can fluctuate dramatically after a separation but before the divorce. Suppose a pension is valued at $500,000 and the non-employee spouse is awarded $250,000 of that in the settlement. Then, prior to the settlement date the market takes a nosedive and the pension is only valued at $300,000. This means the non-employee spouse still walks away with $250,000 while the employee spouse is left shortchanged.

The account must be appraised to determine its present value; the valuation method may be present value, also known as “cash out” value, deferred division where no present value is determined or reserved jurisdiction whereby the court retains authority to order distribution at some point in the future. Reserved jurisdiction leaves both parties in limbo and is not considered a good outcome for a pension plan during the divorce. Using the cash out method is certainly the easiest way to divide the pension during settlement negotiations—the non-employee spouse is awarded a lump-sum settlement with the employee-spouse retaining the pension. However, for long-term financial benefits, the deferred division may result in a higher settlement for the non-employee spouse.

What is a QDRO?

A QDRO tells the pension plan administrator exactly how the pension will be divided, according to the judge’s ruling in the divorce. The QDRO must be prepared following the guidelines of the company’s pension plan but must also conform to the Employee Retirement Income Security Act. Any adjustments or options for early withdrawal must be made available to the non-employee spouse as well as the employee-spouse. The QDRO applies to the 401(k), the IRA or any other traditional pension plan which qualifies for special tax treatment. Most military and government pensions are covered under other laws, and QDRO’s only apply to plans qualified through the IRS. Railroad retirement benefits, Social Security payments, Workman’s Comp awards for disability and compensation for military injuries generally do not fall under retirement benefits. If your spouse has any of these types of benefits, you should speak with your divorce attorney to determine whether you are entitled to other benefits in lieu of a portion of these non-pension benefits.

Other Pension Considerations

Discuss with your attorney whether the pension division will affect your child support payments as in some instances it could. Most pensions specify a retirement date of sixty-five, although there are exceptions—find out what your spouse’s particular plan states. Because QDRO’s and pension plans can be extremely complex, your divorce attorney must have the necessary experience and knowledge in order to ensure you receive the most equitable settlement possible.

Call Today for a Highly Qualified Assessment of Your Divorce

Finding an attorney with the necessary experience in pension division can be difficult however the Law Offices of Matthew S. Pool has that experience and will use it to your advantage. Our goal is to ensure you receive a fair divorce settlement—one that allows you to live in much the same manner as you were living prior to the divorce. We want to make your life easier and less stressful during a time we recognize as extremely challenging. Matthew S. Poole deliberately maintains a lower case load to ensure he is always available to his clients. You are not simply another “case” to us—we have the resources and skills which will make your divorce less anxiety-inducing. Call us today at (601) 573-7429 or take a look at our website for additional information.

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