
If you are going through a divorce and you or your spouse has a pension plan, you may need to divide it as part of your property settlement. One way to do this is by using a qualified domestic relations order (QDRO), which is a court order that instructs the pension plan administrator how to distribute the benefits to each spouse.
There are different ways to divide a pension via QDRO, depending on the type of pension plan, the terms of your divorce agreement, and your preferences. Here are some of the most common methods:
– Coverture/Time Rule: This method calculates the marital portion of the pension based on the ratio of the number of years that the spouse worked for the employer during the marriage to the total number of years that the spouse worked for the employer. For example, if the spouse worked for 20 years and 10 of them were during the marriage, then 50% of the pension is considered marital property. The QDRO then assigns a percentage of the marital portion to each spouse, usually 50/50. This method is often used for defined benefit plans, which pay a fixed monthly amount based on factors such as salary and years of service.
Members service Pension Entitlement |
X |
Service credit attributable to the marital period (Date of Marriage) to (Assignment Date)) ________________ Total service credit earned and purchased at retirement of Member |
X |
50% |
= |
Nonmember’s marital property share. |
– Fixed Monthly Dollar Amount: This method assigns a specific dollar amount to each spouse every month from the pension plan. For example, if the pension pays $2,000 per month, the QDRO may give $1,000 to each spouse. This method is simple and straightforward, but it does not account for inflation or changes in the value of the pension over time.
– Fixed Percentage: This method assigns a fixed percentage of the pension benefit to each spouse every month. For example, if the pension pays $2,000 per month, the QDRO may give 50% to each spouse. This method adjusts for inflation and changes in the value of the pension over time, but it may not reflect the actual contributions or earnings of each spouse during the marriage.
– Frozen Coverture Method: This method is similar to the coverture/time rule method, but it freezes the marital portion of the pension as of a certain assignment date, usually the date of separation or divorce. The QDRO then assigns a percentage of the frozen marital portion to each spouse. This method is used as an alternative to the ordinary Coverture formula, but relies upon a hypothetical pension amount as if the employee had retired as of the assignment date. Most military pensions have to be divided by this formula and a minority of states use this as the default rule if the divorce agreement does not specify otherwise.
Members hypothetical service Pension Entitlement as of the Assignment Date |
X |
Service credit attributable to the marital period (Date of Marriage) to (Assignment Date) Total service credit earned and purchased at Assignment Date |
X |
50% |
= |
Nonmember’s marital property share. |
These are some of the ways to divide a pension via QDRO, but there may be other options depending on your situation. Our QDRO platform allows you to draft your own orders, based on the language of your divorce agreement or judgment. Best of all, you can preview the final documents before you pay, plus receive editable versions after you pay, just in case further edits are needed. Get started today!