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A defined benefit plan is a retirement plan, mainly referred to as a pension plan, in which a retired employee receives a specific amount based on salary history and years of service, where the employer bears the investment risk. Contributions are generally made by the employer, sometimes by the employee or both. The parties must determine the value of the participant's interest in the pension plan. The material portion generally does not include any portion of a benefit acquired before marriage or after the divorce. There are three ways to divide ERISA DB plans:
Defined Benefit Plans, in most cases, have no cash value today.
These plans can be divided equally or unequally by using QDRO. If not divided "in kind," it must be valued today. After a value is determined it is placed on the list of material assets and used to offset other property.
A defined contribution plan is a retirement plan, such as a 401(k), 403(b), 457, or profit sharing plan in which the employee elects to defer some amount of his/her salary into the plan and bears the investment risk. In most plans the employer elects to match a stated percentage of the employee's contributions. It is easy to determine the value of a DC plan by reviewing the monthly or quarterly statements that show the dollar that can be divided. These plans can be divided equally or unequally by using a QDRO. The non-employee has the option to keep the account at the company, transfer the account to a self-directed IRA or liquidate the account without and avoid the 10% penalty if you are under the age of 59½. One thing to remember with DC plans is that they are all different and each has their own set of rules for vesting schedules. Defined Contribution Plans have a cash value today.
Divorce Financial Solutions has assisted in drafting thousands of QDROs for hundreds of different retirement plans across the country. With our knowledge and understanding of the statues that govern QDROs, we have gained significant experience in negotiating with plan administrators. We can assist family law and general practice attorneys in QDRO preparation with the least mount of delay and confusion over misunderstood issues and plan options applicable to the parties.
Divorce Financial Solutions will:
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Facilitate the drafting of a proposed QDRO for preliminary approval by the plan administrator.
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Handle all negotiations with the plan administrator or the plan's legal counsel, which can be difficult and time consuming.
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Upon obtaining a preliminary approval from both the plan administrator and the attorney client, the final QDRO document is delivered to the attorney client with instructions to have the order signed by the opposing counsel and/or parties, entered by the court and served on the plan. Upon receipt of the court certified copy of the QDRO, the plan administrator will notify both parties in writing regarding the awarded benefits, instructions options and tax consequences.
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