If you or your spouse contributes to a retirement account during the marriage, then all or a portion of the retirement account is considered a marital asset subject to division.
Florida Statutes 61.076 specifically provides as follows:
All vested and non vested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs are marital assets subject to equitable distribution.
This includes all individual retirement accounts: (IRA’s), 401k, 403b. Also included are all types of pension plans.
How much of the retirement plan is subject to division?
This depends on the type of retirement plan.
If the retirement plan has an account balance like a 401k or a 403b, then the amount subject to division is the amount that was added to the account during the marriage.
Example: John did not have a retirement account before the marriage, but he started a 401k during the marriage. The value of the 401k at the time of divorce was $50,000.00. All $50,000 is subject to division.
Example: John had started a 401k prior to the marriage. At the start of the marriage John had $30,000 in his account. During the marriage, he contributed an additional $40,000.00 to the account. At the time of the divorce, the account balance was now $70,000.00. $40,000 of the account is marital subject to division.
If the retirement plan is a pension plan, whereby the spouse will receive a monthly benefit when he retires, then the amount that is subject to division is determined using the following formula:
50% x Years that spouse worked for the company during the marriage
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Years that the spouse worked for the company (before and during marriage)
Example: John is eligible for a government pension when he retires. He worked 10 years with the government prior to the marriage. John and his wife were then married for 10 more years and John worked for the government the entire marriage.
The portion of the pension that is marital is 25%
50% x 10/20 = 25%
How is the retirement account actually divided?
This again depends on the type of retirement plan.
If the plan is a 401k or similar type of plan, the following applies:
At the end of the divorce, the Judge will sign a special type of Order called a Qualified Domestic Relations Order (“QDRO”). The QDRO will specify that the spouse is entitled to either a percentage or a specific dollar amount of the retirement plan. The QDRO will be sent to the administrator for the retirement plan. The administrator will then divide the plan and set up a new account for the other spouse.
Example: John and Sally agreed that Sally shall be entitled to $20,000 of John’s 401k. The QDRO will be sent to John’s employer who will set up a new 401k account for Sally in the amount of $20,000.00
If the plan is a Thrift Savings Plan, the same procedure applies as with a 401k only that instead of a QDRO, the document signed by the Judge is a Retirement Benefits Order.
If the plan is an Individual Retirement Account (“IRA”), a direct rollover is used. The non-owner spouse will open up their own IRA account and then the agreed amount will simply be transferred from the existing IRA to the new IRA.
Example: John and Sally agreed that Sally shall be entitled to $20,000 of John’s IRA. John’s IRA is held at Bank A. Sally will open an IRA at Bank B. Bank A shall directly transfer $20,000 to the IRA for Sally at Bank B.
If the plan is a pension plan, a QDRO is also used. When the spouse starts receiving their benefit, the administrator will pay the other spouse their portion of the monthly benefit.
Example: John and Sally agree that Sally is entitled to 25% of John’s pension from Company A at the time of the divorce. At the time of the divorce, had John retired then, he would have received $1,000 a month. John remains with Company A for another 10 years after the divorce and then retires. John is now eligible to receive $2,000.00 per month for his pension. Company A will pay Sally directly the sum of $250.00 per month and the rest will go to John.
If the pension is a military or federal government pension, the same process applies but a different type of order other than a QDRO is used.