Dividing Up Retirement Benefits Is Not an Easy Task

Gone are the days when most families in the Reading area were supported by a single earner who worked for one company his entire life then retired on a comfortable pension. Our current reality is one where both partners work, both of them switch jobs or even careers a couple of times, and their retirement accounts are at least partially self-funded. This shift has had an enormous impact on society and divorce law.

Splitting up retirement accounts, or assets the former couple intended to use to fund their retirement can be one of the most difficult aspects of modern-day divorce. At the Law Office of Gary R. Swavely, Jr., we fight to make sure our clients get every penny of the retirement benefits they deserve.

Below we will go over some retirement account division basics, but this is truly a very complex area of the law. Pennsylvania requires divorcing couples to divide up their property using the “equitable distribution” method. This takes into consideration factors like each spouse’s age, health, education, and income, as well as the length of the marriage. Layered on top of this is a federal law called the Employee Retirement Income Security Act of 1974 (ERISA), which dictates many aspects of retirement accounts, including their division. Few couples can successfully navigate the complex web of state and federal laws governing the division of retirement benefits without the assistance of an experienced divorce attorney, and in many cases, a financial advisor.

The Type Of Benefits Matters

When dividing up retirement accounts, the type of account matters. Whether your accounts are employee-funded or self-funded matters. Whether your retirement plans are defined benefit or defined contribution plans matters. If you are not entirely sure what types of accounts you and your ex have, we can help you figure that out, and then get to work dividing them up.

Timing Matters

When the account was funded matters. If all of the assets in the account were earned before the couple was married, the partner who brought the account to the marriage may be able to keep it for themselves. When a retirement account is funded during the marriage, it will almost certainly be considered a marital asset that is subject to division. Where it gets tricky is when there is an account that was partially funded before marriage but was added to during the marriage.

Timing also matters when it comes to the nuts and bolts of the division. Whether an account is being divided up right now, with a lump sum payment going to each partner, or whether the account will be divided when one or both parties divorce and start taking withdrawals matters.

Tax Considerations

The division of retirement accounts must be carefully recorded in a Qualified Domestic Relations Order (QDRO), which is then sent along with other documents to the applicable plan administrators and the IRS. If all the i’s are dotted and t’s are crossed, the tax implications of the retirement benefit divisions should be negligible.

Your Reading Area Divorce Attorney

If you are thinking about getting divorced, and want to make sure you get your fair share of all of the retirement benefits you are entitled to, Attorney Gary R. Swavely, Jr. is ready to take your call.