In today's economy, retirement benefits are often the most valuable assets to be divided as part of a divorce. However, the division of retirement benefits is often a tricky business. Many retirement plans are defined benefit plans, which means that the amount of money the employee receives is correlated with the number of years worked by the employee and the highest salary earned by the employee. This presents obvious valuation difficulties when the employee goes through a divorce. There is no way to determine precisely how long an employee will work or how high a salary the employee will earn, unless the divorce takes place immediately prior to retirement. It is also possible that the employee spouse will die or be terminated from the employment prior to retirement.
All of the factors listed above make assigning a specific monetary value to a defined benefit plan an impossible task. Instead, attorneys utilize Qualified Domestic Relations Orders (QDROs)to effectuate the division of retirement benefits. A QDRO is an order issued by a judge as part of a family law proceeding. It requires the administrator of a retirement plan in which a party to the action participates to set aside the portion of the retirement account that the other spouse is entitled to into a separate account. The non-participating spouse's portion is generally determined by the fraction of the number of months the parties were married divided by the number of months of participation in the plan. The plan administrator is thereafter responsible for administering both accounts, and the non-participating spouse will receive his/her portion of the benefits after the retirement of the participating spouse and directly from the plan administrator.
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