| Yes. You do have to share your
pension if you acquired any part of the pension after the date of marriage and before the
date of separation. You do not have to share the pension if you acquired it prior to the
date of marriage or after the date of separation. Specifically, you have to divide the
portion acquired during marriage equally because retirement benefits are a form of
employment compensation, like earnings. Retirement benefits are subject to division in
marital actions, regardless of whether they are (1) benefits being received; (2) benefits
that are matured but are not being received; or (3) benefits that are not matured. Generally speaking, there are two types of Retirement Plans:
A.) Defined Benefit Plans- retirement plans
contributed to solely by the employer and not the employee. It is usually necessary to
value these with an actuary. An example of a defined benefit plan is a corporate sponsored
pension. Defined Benefit Plans may be divided by either a 1) present in kind division or
an (2) asset distribution "cash out" method. The valuation of Defined Benefit
Plans is generally based on employees age at retirement, years of service at retirement,
and highest income level achieved.
B.) Defined Contribution Plan- retirement
plans contributed to by the employer as well as the employee. These can be valued by
reviewing the retirement plan statement at the date of separation. An example of a defined
contribution plan is a 401K or an IRA.
When there is a community property interest in an employee
benefit plan, it may be advisable or necessary to join the plan as a party to the marital
action to protect the non-employee spouse’s interest. California statutes provide
that no order or judgment in a marital action is enforceable against an employee benefit
plan unless the plan has been joined as a party to the proceeding.
Some employer sponsored plans can be divided by the
Judgment of Dissolution or other regular order of the Family Court. Corporate defined
benefit plans and some defined contribution plans, however, are controlled by federal law
-The Employee Retirement Income Security Act ("ERISA"). ERISA established a
comprehensive federal regulatory program governing all private qualified employee pension
plans. However, the Court can not make orders expanding the plan benefits.
ERISA superceded all state laws insofar as they concern
private pension plans. However, ERISA does not (1) preempt California community property
law or (2) prohibit a California court in a marital action from ordering a benefit plan to
pay a portion of a participant’s benefits to a former spouse, (3) preempt state law
which provides for joinder of a benefit plan (4) require joinder of a benefit plan in
marital actions. ERISA provides that an order or judgment dividing the community interest
in a pension plan is binding and enforceable against the plan as long as the order or
judgment is a qualified domestic relations order ("QDRO"). ERISA pre-empts State
court orders. Therefore, a Family Court domestic relations order, in order to have any
effect in dividing assets of these plans, must "qualify" under the requirements
of ERISA. If the order qualifies, it is called a QDRO. Whether or not a QDRO qualifies
under ERISA is determined by the plan administrator
All plans are not governed by ERISA. For example, state and
local government employees’ retirement plans are not. Two examples of government
retirement plans are CALPERS and CALSTRS. Although these plans are not governed by ERISA,
they still must be divided.
If you do need a QDRO, it is advisable to have your family
law attorney ensure that the QDRO is prepared prior to the entry of the Judgment. The QDRO
should set forth the terms for the division of the pension that you and your spouse agreed
to even if the language is set forth in your judgment. There are several problems with
reserving on jurisdiction (not promptly preparing the QDRO) including but not limited to
the risk that one of the parties might die prior to entry of an order dividing the
benefits or the possibility that when the time arrives for dividing the asserts, one of
the parties may be reluctant or even unavailable.
In the United States Supreme Court case Kennedy v. Plan
Admin. (2009)129 S. Ct. 865, the Court held that although Wife divested herself of all
right, title, interest and claim in and to Husband’s retirement benefits in the
dissolution judgment, it was not required to be approved by the plan administrator because
no QDRO was prepared directing the plan administrator that Wife was waiving her interest
in said plan. As such, after husband’s death, despite the parties negotiated
agreement that she would be waiving all interest in said, Wife received the interest in
Husband’s retirement benefits against the wishes of Husband’s estate. Id.
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