Retirement Benefits Are Divided at Divorce

​​Q: My spouse and I are divorcing. How will we divide our retirement accounts?
A: The Supreme Court of Ohio has held that retirement benefits accumulated during a marriage are marital assets, and must be divided as part of an equitable division of property. Retirement benefits really represent deferred wages earned during the marriage that are being held for future distribution. Those assets may be vested, unvested or in payout status. “Equitable” division means this property is to be divided fairly between you.

Q: What types of retirement benefits must be considered?
A: Private plans offered through employers or accumulated by an individual, and public plans offered through governmental, federal and state entities, must be considered. Federal public plans include the Civil Service Retirement System, Federal Employees Retirement System, Federal Thrift Savings Plans, Railroad Retirement Benefits and Military Benefits, in addition to Social Security. In Ohio, state plans include the State Teachers Retirement System, Public Employees Retirement System, Police and Firemen Retirement System, and deferred compensation plans.

Private plans provided by an employer may include 401(k) plans and defined benefit plans. A defined benefit plan pays a defined monthly benefit at retirement for a defined period or for the life of the plan participant. Plans created by individuals may include traditional IRAs, Roth IRAs or a self-employed retirement plan. The Internal Revenue Service’s rules and regulations govern individual plans as well as the amounts that can be contributed to all individual plans.

Q: How are the values of retirement plans determined?
A: Plans such as 401(k)s and IRAs are valued from the statements of invested funds. Most are invested in publicly traded stocks, bonds, mutual funds or cash accounts. Plans that provide a monthly benefit at retirement must be valued by determining the present dollar value of the future benefit. You likely will need expert analysis and testimony to establish the present dollar value of those plans. Often, experts disagree about the calculation, including what portion of a plan is marital. Pre-marriage contributions and their appreciation since the marriage are not part of the marital asset to be divided.

Q: How are retirement plans divided?
A: Marital retirement benefits may be divided by segregating each plan individually. If there are several plans, both private and public, each spouse may receive one-half of the marital portion of each plan. Also each party may receive one or more of the individual plans with a transfer of some portion of a plan to equalize the total distribution. A third way of dividing benefits is to allow the plan participant to fully retain the benefit while awarding other assets of equal value, such as a marital home, to the other spouse. Tax implications must be considered when choosing this method.

Q: How are plan ownership interests transferred?
A: To transfer an interest in a state plan, Ohio’s Division of Property Order form must be approved by the divorce court. To transfer an interest in a federal “qualified” plan, a Qualified Domestic Relations Order must be approved by the divorce court and the plan administrator. IRAs that are not qualified plans can usually be transferred by a simple letter of instruction.

When drafting transfer documents, one must consider whether or not plan benefits, such as survivorship rights, death benefits before retirement and cost of living adjustments, are to be provided to the non-plan participant. The documents also frequently contain a provision saying that each party is entitled to gains and losses on the divided account once the date of division is established,

Q: What about our Social Security benefits?’
A: Social Security benefits cannot be divided in the same way as retirement plans, but divorce courts still must consider those benefits when making an equitable distribution of property. There is a difference of opinion as how to calculate the present values of future Social Security benefits, but there must be an offset of those benefits against the present value of a spouse’s public plan. If, for example, you have future public plan benefits, but no Social Security, and your spouse has Social Security but no public plan, then either the present value of your spouse’s actual Social Security benefits, or your hypothetical benefits as if you had participated in Social Security, will be offset against the present value of your public plan when making an equitable distribution.


This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Stanley Morganstern, former managing partner of​ the Cleveland firm, Morganstern MacAdams & DeVito Co., LPA. ​​

Articles appearing in this column are intended to provide broad, general information about the law. This article is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from a licensed attorney.



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