Retirement & Pension Division

Retirement and pension plans may be the most valuable community property assets, but they are often overlooked or not properly divided, especially if the parties try to do their own divorce, or do not get good legal advice.

Here are some FAQs:

My wife and I have been married for less than 10 years, and I am in the military. Is it true that she is not entitled to any of my military retirement?

No. Under California law, your spouse is still entitled to a percentage of your military retirement, based upon the following formula:

Number of months of creditable service from date of marriage to date of separation, divided by number of months of creditable service at date of retirement, multiplied by 1/2.

The confusion that arises over this rule is because the Defense Finance and Accounting Service will provide direct enforcement of an order to divide military retirement only if the military service during the marriage was 10 years or more. If that service is less than 10 years, the spouse’s share of the retirement must be paid directly.

I have a 401(k) plan at my work and my wife has a 403(b) plan at her work. Both of us started working before our marriage. How are these plans divided?

The contributions to the plans prior to marriage, and after the date of separation, are separate property, while the contributions during the marriage and up to the date of separation (including any matching contributions by the employer) are community property. The separate and community contributions may have earnings and losses that must be allocated between separate and community property. An experienced divorce attorney can advise you on the proper way to divide these assets.

I am a member of the California State Teachers’ Retirement System. I have heard there are two different ways of dividing the community interest in my future retirement benefits. What are those ways?

The laws governing CalSTRS, like those governing a similar plan called the California Public Employees’ Retirement System, are complicated and can be confusing. The simplest explanation is that during the dissolution proceeding, the non-member spouse can choose whether the court order will instruct CalSTRS to divide the community property service credit and contributions, or to use a formula to divide the retirement benefit of the member spouse at the time of retirement. These are important decisions, and both spouses need to obtain expert advice from an attorney who is familiar with these retirement plans.

What is a Qualified Domestic Relations Order?

This order, commonly referred to as a “QDRO,” is a court order for division of retirement plans that are governed by a federal law known as the Employee Retirement Income Security Act (“ERISA”). This federal law sets minimum standards for employer-established pension and retirement plans. It also sets requirements for QDROs which are used to divide retirement plans in a divorce or legal separation proceeding. The requirements for a QDRO are complicated, and each employer has its own procedures and model orders. It is important to get legal advice from an attorney who has knowledge and experience with these complex issues.