Taking Action

Get Answers Start Your Divorce Stop Your Divorce Divorce Forms Online Support DivorceDesk

Divorce Tools

Online Divorce Online Negotiation Custody Tracker QDRO Preparation SEE ALL

Info Categories

Contemplating Divorce Children & Divorce Divorce, Dollars & Debt Divorce Laws Divorce Process Divorce Negotiation SEE ALL

State Resources

California Florida Illinois New York Texas SEE ALL

More Information

Articles Checklists Research Center Cases of Interest Dictionary Encyclopedia Encyclopedia (pop-up) Blogs

For Professionals

Generate Clients Free Network Page Submit Articles Case Management Sign In

The Divorce Encyclopedia
Defined Contribution Plan

Term Definition Defined Contribution Plan - an individual or separate account in the employee-spouse’s name, whereby the worker contributes pretax dollars to his or her account that are matched to a certain amount by the employer’s contribution.
Application in Divorce For many workers, these retirement plans now replace the defined benefit plan -- the so-called company pension.

A defined contribution plan is marital property; indeed, pensions and houses are the two most valuable assets a couple divide in a divorce.

In a divorce, the value of a defined contribution plan is easy to calculate: it is simply the balance in the account.

The valuation date of a defined contribution plan is very important because, unlike a defined benefit plan (the old fashioned company pension), the value of a defined contribution plan can fluctuate dramatically after a couple separate but before they divorce.

In dividing a defined contribution pension, courts are unanimous that they are not to be discounted to present value.

Like other tax-deferred or tax sheltered retirement plans (the IRA, SEPs (which are Simplified Employee Pension Plans), Keoghs, ESOPs, 401(k)s, 457s and 403(b)s), defined contribution plans carry penalties for early withdrawal. Courts largely agree that early retirement penalties should not be considered in the distribution without evidence that the distribution necessitates withdrawal.

Like other pension plans, classification disputes are very likely when a worker earned some of the benefits prior to his or her marriage.

The most common way to distribute these plans is a QDRO.

Divorcing couples can make a "trustee to trustee" transfer to the spouses qualified retirement plan, and couples who transfer pension benefits should state that the transfer is being made "trustee to trustee" in their separation agreement. A nonemployee spouse who takes the money directly is subject to a 20 percent withholding by the I.R.S.; therefore, these accounts must be rolled over when they are distributed as part of a divorce.

Very often in settlements, the worker employee retains the retirement plan and offsets its value with another asset. This offset method has advantages, but the nonparticipant loses the advantages of tax-deferred income accumulation.

These plans, promoted by corporate America because it relieved it of the legacy costs associated with defined benefit plans, transferred the burdens and risk from companies to employees. Parenthetically, it should be remembered that the first generation of workers to retire with these plans is still working, so it remains to be seen how these workers will do long term in comparison to their parents who enjoyed the benefits of defined benefit plans.


See also Defined Benefit Plan.

Add the Divorce Encyclopedia
to Your Website

The Research Center

Give Our Research Center a Try. Gain access to the same research material that lawyers often use to establish and win divorce cases. This material consists of legal journal articles and case explanation/analysis documents on a wide range of topics. If you think your situation is unique, your answers will most likely be here. In order to gain access to this area, you must establish an account, but you can search the documents before deciding.

The Divorce Source Difference

Since February 1st, 1997 (when we initially launched Divorcesource.com) we have helped millions of people contemplating or experiencing divorce. The reason we have been able to reach so many people is because we have made it a priority to listen to our customers. We have built a trust by listening and delivering what the customer needs, rather than what we think they want. This is the Divorce Source difference.

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:

Custody Scheduling and Tracking

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:


Start Your Divorce File for Divorce


Settle Your Divorce Negotiate Your Divorce


Track Child Custody Track Custody & Visitation

Guarantee Official PayPal Seal Facebook Twitter Versign Secure Site