Pensions, Divorce and Common Mistakes

Many woman are not well served by their lawyers, who not are well grounded in the subtleties of the Employee Retirement Income Security Act (ERISA), which is the federal law covering private pensions, and the Retirement Equity Act, which broadened the rights of divorced spouses, or even the particular pension plan of a divorce case.

The Woman's Institute for a Secure Retirement (WISER) warns against common mistakes divorce lawyers make regarding pensions that a particularly damaging to women. The long-term interests of a middle-aged woman going into divorce can be comprised by a lawyer who

  1. fails to ask for the important information about a spouse's benefits and retirement soon enough. Pension plans vary greater in regards to the terms and conditions of when a pension can be paid under a domestic relations order.
  2. fails to prepare any pension order. This should be done at time of the divorce. The death of a former spouse, his retirement, remarriage can reduce the benefits a former spouse otherwise would have received.
  3. fails to obtain information about every retirement benefit that might be marital property. Many employees have more than one pension plan at the same company. Some people have pensions from companies they no longer work for.
  4. fails to obtain information about all pension plans provisions. Benefits vary greatly, and some plans pay more than one type of benefit. For example, some include cost of living escalators, and others have provisions to encourage early retirement.
  5. fails to ask for survivor benefit or does not mention that none are available. The death of a worker-spouse may terminate the benefits.
  6. fails to explain how retirement benefits are usually divided under state law. State marital and community property laws often specify the division and distribution of retirement and pension benefits. Sometimes couples can use these laws as the basis of negotiation.
  7. fails to explain what a former spouse might do to reduce or eliminate benefits to the former partner. Sometimes a former partner may fail to apply for a pension or waives his right to a pension or become injured or disabled.
  8. fails to explain how remarriage might affect benefits. Some federal, state and local government employee benefits terminate if the former wife remarries.
  9. fails to explore the unusual legal requirements or loopholes that could result in the pension order being rejected by the plan administrator. Some plans are not required to accept any court order assigning benefits to a former spouse.
  10. fails to have the proposed pension order preapproved before being sent to the court. This means that the plan may have to be filed with the court a second time if the administrator rejects it the first time.
  11. fails to make sure the final pension order is sent to the plan and accepted. Even when the payout of benefits is years in advance, the court order should be approved promptly.
  12. fails to explain Social Security benefits. These benefits are not marital property. A spouse married at least 10 years may be eligible to apply for them as a divorced spouse.



Suggested Reading
Pension Issues in Divorce Pension Issues in Divorce
When couples get divorced they must decide how to divide their property. Retirement benefits (pensions) often form a substantial part of the parties' total marital estate and many times are the largest single marital asset afforded the couple. Similar to other assets, pensions are typically divisible in cases of divorce to the extent that they are acquired during the period of marriage.

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MANY MODELS -- Pension and retirement plans come in a bewildering array, with many diverse provisions; however, the two basic models are: the defined benefit or defined contribution. The defined benefit plan is generally a retirement annuity, wherein the employee contributes nothing and the employer sets aside benefits for all employees in a pool; the defined contribution plan is an individual or separate account in the employee-spouse's name, whereby he or she contributes pretax dollars to his or her account that are matched to a certain amount by the employer's contribution.

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