I have handled many unique divorce cases as a Florida divorce lawyer. A common question that clients have is if it’s possible to protect their retirement.
While there’s not a “catch-all” answer for this question, since each case and situation is unique, there are some steps you may be able to take to protect your retirement. It’s also beneficial to know how Florida law works regarding asset division, which I am here to explain.
Florida’s Equitable Distribution Laws
Florida uses equitable distribution when it comes to divorce. This means that all your assets will be divided equitably and fairly. This doesn’t always mean a 50/50 division.
Instead, the court will consider the contributions you and your spouse made during the course of your marriage. Not all contributions are financial, and any that contributed to the family will be considered. One example is childcare, which is considered a significant contribution to a marriage.
Another asset that some people overlook in a Florida divorce is retirement funds that have been established or grown during the course of a marriage. Since the funds are in place to ensure a secure retirement (financially), it’s something that can be overlooked or ignored.
Understanding How Retirement Plans Are Divided in a Florida Divorce
The retirement plan or pension plan connected to your employment may be considered one of the most valuable long-term assets you possess in your marriage.
While it may sound counterintuitive, the value of your IRA or 401(k) plan is divisible. While it is opened by just one person in the marriage and then funded by that person’s employer, it’s still marital property if it was started during the marriage.
One exception to this is if you had these assets before getting married. If you did not have deposits made in these accounts during your marriage, it might be possible to argue it’s a separate asset. Unfortunately, this isn’t usually the case since the purpose of these funds is to grow as time passes.
The contributions that were made during the marriage are subject to equitable distribution.
Dividing Retirement Plans in Florida
For some types of retirement plans, a Qualified Domestic Relations Order or QDRO will be used to direct the retirement plan administrator on how to divide the assets. This is done to ensure each spouse receives a fair amount of the retirement plan.
Factors Considered When Retirement Plans Are Divided
As mentioned above, retirement plans (like other assets) aren’t always split 50/50. There are several factors considered when dividing retirement plans, which include:
- Length of the marriage
- Each partner’s financial contribution to the fund
- When the fund was created
- Contribution of non-financial assets to the marriage by each partner
- Each partner’s debt
Different Types of Retirement Plans and How They Are Divided
Along with the factors above, there may be other rules or guidelines regarding how certain types of retirement plans are divided. Learn more here.
Defined-Contribution Plan vs. Defined Benefit Plan
There are two basic types of retirement plans – defined benefit plans and defined-contribution plans.
The defined-benefit plan is usually called a pension. With this retirement account, the owner receives a set amount of money when they retire. The specific amount can be paid periodically or in a lump sum. The account holder’s employer will usually pay the entire cost of this plan.
A defined-contribution plan doesn’t pay a set benefit when the owner retires. Instead, it lets the owner save money for their retirement in a tax-deferred account. One example of this plan is the 401(k). As time passes, the account holder can make contributions that their employer sometimes matches. The owner can then take money out of the account to cover living expenses and other related costs.
How Are These Accounts Divided?
If an account is a defined-contribution plan or a defined-benefit plan will impact the way the plan’s proceeds are divided.
With defined-benefit plans, the ex-spouse can choose to get a “cash out” payment. This means they can get a percentage or portion of the current value of the account when the divorce is filed. They can then reinvest it or spend it. Another option is for the ex-spouse of the account’s owner to receive payments in the future when they retire.
The account balance will usually be multiplied by a vesting percentage for the defined-contribution plans. This number is then divided between the two parties.
Dividing government pensions in a divorce is challenging. That’s because government pensions (from local, state, or federal bodies) are considered exempt from ERISA (Employee Retirement Income Security Act). The ERISA determines QDROs. Because of this, administrators of government pension plans do not have to accept QDROs and do not have to make retirement benefits payments to the ex-spouse who is not an employee.
The Florida Retirement System covers county and state workers and accepts QDROs voluntarily. However, municipalities have the option to reject or accept QDROs. If a municipal retirement plan rejects a QDRO (and most do not), the spouse who was not an employee has the option to have their spouse’s municipal pension valued and then receive an asset that’s of equal value.
For federal pensions, it’s necessary to get creative regarding the structure of the court order to ensure a non-employee spouse receives the benefits they are entitled to.
Military Retirement Benefits
In situations where one person is in the military and entitled to receive military retired pay, their spouse may receive some of these benefits in the divorce. A service member’s military retired pay can be treated as marital property based on the Uniform Services Former Spouse Protection Act.
The courts usually follow certain general principles when dividing retired military pay. For example, non-service members are not to be awarded more than 50% of the total benefits. Additionally, the service member must have a minimum of 10 creditable service years during the marriage for their ex-spouse to receive direct payment of retirement pay benefits from the government.
Work with a Florida Divorce Lawyer for Assistance
When it comes to your retirement plan and equitable division in a divorce, there is a good chance it will be divided with your ex-spouse. In most cases, the only situation where this would not happen is if you started the retirement plan before your marriage and did not contribute to it during your marriage.
In all other cases, these plans – no matter the type – are evaluated and divided based on certain factors.
If you have questions about your rights when it comes to your retirement plan and what your ex-spouse is entitled to, contact me at Griffin Family Law, PLLC. I can review the facts of your case and discuss what outcome you would like. While there may not be a way to prevent the division of your retirement plan, you can count on me to work to secure you the best possible outcome for your case.
The first step is to call my office to set up an initial consultation. During this, I will learn more about your situation and create a plan to move forward with your case.