Perhaps they were at one time, but employer-backed retirement plans are no longer a benefit reserved for executives and government or union employees.
Many if not most private employers in this state offer their employees a 401(k) or some other type of retirement plan.
Of course, those who traditionally have done so are still able to take advantage of retirement benefits as well. The many Marylanders who live in the greater D.C. area and work for the federal government, for example, are eligible for a pension.
Under Maryland law, retirement plans can be marital property that a court will divide fairly. The court will consider several factors when dividing a retirement plan.
Importantly, the spouse who owns the plan must have earned the part of the plan the court will divide during the marriage.
Dividing a retirement plan can be a complicated process
While this may seem straightforward enough on paper, actually dividing a retirement plan during a divorce can be a complicated process.
- Retirement plans frequently are one of the most valuable assets a person owns.
- Putting a value on a retirement plan, especially if it is a pension, is difficult and may require a financial expert’s help.
- Even a 401(k) can be harder to value if there are loans against it or if part of it was earned prior to a couple’s marriage or after their separation.
- For tax reasons, splitting a retirement plan will usually require the couple to prepare and execute a separate order called a QDRO, which is short for Qualified Domestic Relations Order.
- A QDRO directs the retirement plan’s administrator to divide the plan, usually in the future. It must be in a proper legal form and legally compliant both with IRS rules and the plan’s own requirements. Delaying or messing up a QDRO can be costly.
- Losing a part of one’s retirement plan can affect a Marylander’s long-term plans and goals. While it is usually not possible to avoid dividing marital property, a person may wish to think carefully about whether they should perhaps offer some other solution.