How to Split the Pension in a Divorce

Unlike other retirement accounts, dividing a pension is often difficult because it’s hard to place a value on what the pension might be worth in the future, and some pensions are not guaranteed until the employee spouse has worked for the company for a certain number of years. For example, in most circumstances, a military service member does not receive his retirement benefits until he has served for at least 20 years.

Marital Portion

Typically, a spouse will receive a share of the other spouse’s pension earned during the course of the marriage. In community property states, a spouse is typically entitled to half of this “marital portion” of the pension. However, in equitable distribution states, a spouse is only entitled to a "just and equitable" portion of the pension, which a court may determine to be half or less than half of the pension’s ultimate value.

Distributing the Pension

Unless the entire pension was earned during the marriage, a spouse may receive less than half of the pension’s ultimate value. The pension can be divided by giving one spouse a percentage of the pension that is to be paid when the other spouse retires. Alternatively, the court can assign a monetary value to a spouse’s marital portion and award that value by increasing the spouse’s value in another asset. For example, if your marital portion of your husband’s pension is $75,000, the court could award you a $75,000 higher share of another asset like your family home so that your spouse receives the entire value of his pension but you receive more of the house’s value.

QDRO

A qualified domestic relations order – or QDRO – is an order issued by a court, including a divorce decree, that creates a right in one spouse to receive a portion of the employee-spouse’s pension. Your divorce decree must meet the QDRO requirements as outlined in the Employee Retirement Income Security Act or it can’t be honored by the pension plan administrator.

QDRO Requirements and Function

A QDRO must contain certain information, such as the name of the pension plan participant and the ex-spouse as well as the dollar amount or percentage of money to be paid to the ex-spouse. There are also certain items a QDRO cannot contain, such as a requirement that the pension plan provide increased benefits. While the QDRO can provide you with direct payments if done properly, if the QDRO is not correct, you may be forced to return to court for a modification.