Pension, Divorce and the Defined Benefit Plan
Key Points
  • Defined benefit retirement plans are distributed on a monthly basis to the alternate payee upon the participant’s retirement.
  • As opposed to the defined contribution plan there is no lump sum payment that the alternate payee can receive.
  • When you negotiate your divorce settlement and you are splitting a defined benefit make sure everything is done properly to ensure the non-participant receives lifetime benefits.

This is a plan set up by a company, union, or individual that provides a participant with a monthly income for life upon retirement:

Examples: IBM Retirement Plan, AT&T Pension Plan, Bricklayers Pension Fund-Local 21.

When a QDRO is drafted for this type of plan, benefits may commence to the Alternate Payee when the Participant reaches his/her earliest retirement age or when he/she actually retires or at any time in between. The benefit is distributed in monthly payments for either the lifetime of the Participant or the Alternate Payee.

Some Key Facts to Remember:

The Alternate Payee typically cannot be awarded a lump sum dollar amount. Any benefit to be awarded to an Alternate Payee must be stated in terms of a monthly amount.

If it is the intent of the parties that the Alternate Payee receive benefits for her lifetime, it is not always necessary for the Participant to elect a "Joint & Survivor" annuity. Some plans will convert the Alternate Payee's share of the Participant's benefit into a benefit based on her lifetime.

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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WIFE’S DISADVANTAGE -- Women of all ages often go into divorces on a less equal footing than their husbands and, therefore, must pay particular attention to the long-term consequences of the division of the marital estate. Women may enter and leave the work force to the demands of child rearing, which lowers their contribution to their own pension plans (if they have them), and they may, for the same reason, juggle low-paying, part-time jobs that together yield a living wage but one without benefits and certainly no pension.

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