52 RI Bar J., No. 2, Pg. 13 (September, 2003). Pension Benefits Considerations in Divorce Cases.

• Author: BARBARA A. BARROW, ESQ.

Rhode Island Bar Journal

Volume 52.

52 RI Bar J., No. 2, Pg. 13 (September, 2003).

Pension Benefits Considerations in Divorce Cases

Pension Benefits Considerations in Divorce CasesBARBARA A. BARROW, ESQ.Barbara A. Barrow practices with Updegrove & Gontarz, LTD., in Middletown, RI.When a couple gets divorced, their assets are subject to division. In Rhode Island, those assets often include pension benefits. Pensions vary significantly and must be considered when negotiating the equitable distribution of marital assets, as these assets may constitute a considerable portion of the marital property.

A Qualified Domestic Relations Order (QDRO) determines the method used to distribute pension assets. A QDRO is a court decree that allows a portion of benefits to be paid to an Alternate Payee. The QDRO sets forth instructions for the Plan Administrator to follow in dividing a pension between parties. Information included in a QDRO must comply with the federal requirements of the Employee Retirement Income Security Act of 1974 (ERISA) (29 USC §1001 et seq., 29 CFR 2509 et seq.) and Section 401 of the Internal Revenue Code (IRC).

Private sector employee benefit plans are governed by Title I of ERISA, which sets forth standards to assure indubitable financial management and evenhanded maintenance. Many of these plans will pre-approve a QDRO prior to submission to the court and provide boilerplate drafts for attorneys.

Under ERISA, a QDRO must contain the following:

* Names and addresses of the Participant, the person who earned the pension and the Alternate Payee, the person who is awarded a portion of the pension. An Alternate Payee may be the spouse, former spouse, child or other dependent of the Participant.

* The identity of the Plan from which the benefit is to be transferred

* The amount to be transferred, either by formula, percentage, or amount

* The number of months or period of payments

A defined benefit plan is a pension plan paying a monthly benefit to an employee after that employee retires. The total years of service and final salary are used to calculate this benefit. A defined contribution plan, such as a 401(K), thrift and savings plans, consists of before-tax employee contributions. Often divided by lump sum, a payout is subject to considerable taxation if not directly deposited into a tax-qualified account that exists or...