Retirement division done carefully, not carelessly

Pension plans are the least understood of all retirement accounts. Many lawyers and their clients assume that the value on the statement is what the plan is worth (very incorrect) and that the value of the plan can be cashed out immediately after divorce (very often incorrect, and even if you can cash it out, it is typically a terrible idea). Pension plans also carry unique concerns related to survivor benefits and separate versus shared interest payouts that are often overlooked in the divorce settlement language. These seemingly small factors can make or break a retiree's finances and can cost them a lifetime of payments if they are not addressed correctly.

Defined comp plans are a lot easier to understand: cash in + stock market gains and losses = your balance. However, these can be even harder to divide than a pension because depending on state law, you may have to trace out premarital and postmarital contributions, plus the stock market gains and losses on those specific contributions, to make sure that both parties get their fair share of the account - it is not nearly as simple as "divide the balance of the plan in half."

I could talk for hours on the complexity of military retirement division — and I have, teaching classes about it to other lawyers. Depending on the date of the divorce settlement, the servicemember's spouse may end up with far less than he or she is entitled to under state law due to the new restrictions on direct pay from the military. In addition, the Howell U.S. Supreme Court case limits a military spouse's remedies if the servicemember is awarded a disability benefit after a retirement division order is entered — making it extremely important to address that possibility in the divorce settlement itself.

CSRS or FERS, TSP or LMNOP (okay, that one is fake), we prepare division orders - known as Court Orders Acceptable for Processing (COAPs) for federal retirement plans.

If the alphabet soup of retirement plans is driving you insane, just wait until we start talking about state plans. Some states are reasonable, like KPERS - which covers nearly all Kansas public employees - while other states are insane, like CALPERS, CALSTRS, LACERA, OCERS ... California easily has dozens, many dozens, of state and local retirement plans. State plans are not governed by federal retirement law, so they have their own state and local rules and regulations that must be adhered to — making them a particularly poor fit for an Internet template or a self-representing divorcee's attempt at DIYing a DRO. (Yes, because federal law does not apply, most state plans call their retirement division orders DROs instead of QDROs. That'll win you trivia night some day, I promise!)

Whether you need help splitting an IRA or a Railroad Retirement System (RRS) plan, if you don't see it listed, reach out anyway and we'll discuss your options - there are far too many plans to list them all here.