For spouses who have a small number of possessions to divide during a divorce, property division can be relatively simple. However, in a divorce that involves complicated assets, determining “equitable distribution” of property is much more difficult. This blog post tackles one of the most important types of divisible assets: pension plans.
First, to answer the question: yes, pensions (even unvested pensions) are marital assets that can be divided during a Minnesota divorce. However, courts do not divide pension plans like other marital property. They must follow very specific state and federal rules.
Dividing Pension Plans: QDROs
Under federal law, to divide a 401(k) or pension plan, divorcing spouses must obtain a Qualified Domestic Relations Order (QDRO). A QDRO is a court order “that creates or recognizes the existence of an ‘alternate payee’s’ right to receive, or assigns to an alternative payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan.” There are specific requirements that an order must meet to constitute a QDRO.
Dividing pension plans is not as cut-and-dried as dividing other property. For example, until retirement, the exact monetary value of a pension plan is generally unknown. Thus, most QDROs must use a fraction to determine each spouse’s share of the pension plan.
A non-working spouse can receive up to one-half of the portion of the monthly pension payment that can be attributed to the years of marriage. In other words, if one spouse worked for twenty years and was married for ten of those years, the other spouse can receive one-half of the pension that can be attributed to those ten years of marriage.
There are other factors involved in dividing pension plans during a divorce. That is why it is important to speak with a Minnesota family law attorney experienced in pension division.
Source: United States Department of Labor, “QDRO’s: The Division of Retirement Benefits Through Qualified Domestic Relations Orders.”