Retirement & Employment Benefits
For many spouses going through divorce, the largest and most complex community assets are the retirement accounts and other employment benefits. Three of the most common types of retirement accounts and employment benefits are deferred compensation plans (e.g., pension plans), defined contribution plans (e.g., 401(k)s and IRAs), and stock options.
The attorneys at Wilhite & Lea, P.C. are experienced family lawyers that have knowledge in marital property division in Texas. Contact us for assistance and representation in regards to retirement and employment benefits.
Issues Affecting the Division of Retirement and Employment Benefits in Texas
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Deferred Compensation Plans
Deferred compensation plans provide a certain amount of money to an employee usually upon reaching normal retirement age after a pre-determined number of years of service. The amount of the benefit is usually calculated by averaging the employee’s income, and then multiplying that average by a ratio of the age of the employee and the number of years of credible service to the employer.
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Defined Contribution Plans
Defined contribution plans are accounts that contain stocks, cash, and other liquid assets. Employees contribute a portion of their salaries to the plan, and the employer will often match the employee’s contribution up to a certain percentage. These accounts typically have a specific value on any one day; no matter the age or years of service of the employee.
The return on investment (ROI) of contributions will establish the absolute amount of their fund. These plans are more transferable than defined benefit plans given that employees can turn over their contribution funds into a new employer's retirement plan.
Examples of defined contribution plans are:
- Profit sharing plan
- Stock savings plan
- 401K
- 403B
- Keoghs
- Individual Retirement Accounts (IRA)
- Roth IRA
- SEP-IRA
- Educational IRA
- Deferred compensations plan
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Stock Options
Stock options are shares of the company granted to the employee as a reward for service to the employer or to compensate the employee over and above salary or hourly wage, and usually vest after a pre-determined amount of time of employment.
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Job Specific Retirement Benefits
Some professions will provide very specific retirement benefits. When going through a divorce involving property division or financial disputes, it's important to retain an attorney that is familiar with your profession and it's retirement benefit plans. Teachers, firefighters, police officers, and other professionals should consult an attorney with knowledge of the retirement benefits particular to their profession, including:
- Teacher Retirement System (TRS)
- Firefighter Retirement Plan
- Firefighter Retirement Fund
- Deferred Retirment Option Plan (DROP)
- Post Retirement Option Plan (PROP)
- Police Officer Retirement Plan
- Police Officer Retirement Fund
The first step the attorney must take in advising you about dividing these assets is to determine what portion is community property. During the discovery process, the attorney will request documents and ask written questions of the spouse with the retirement benefits to determine the present value of the asset, when the asset was accrued, and how the asset was accrued. Once the necessary documents and other information are acquired, the attorney will often consult with experts in other fields such as accounting, tax, and federal ERISA law to determine the character of the asset - whether separate or community property.
Retirement and employment benefits are sometimes acquired partially before marriage, and partially during the marriage. In order to determine the marital property character of the benefits, the attorney and other experts must ‘trace’ the assets from the time they are acquired until the date of divorce. Stocks split, new stocks are acquired, others are sold, and in order to determine what portion is currently community property, the process of tracing must be used.
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Qualified Domestic Relations Order (QDRO)
Once the marital property character of the retirement benefit account or employment benefit is determined, the parties and their lawyers can negotiate the manner in which the benefits should be divided. As with other issues in the divorce, if the parties cannot agree on how to divide their retirement and employment benefits, the dispute can be submitted to the judge who will make a just and right division of the assets.
Once an agreement is reached, the plan administrator for the retirement account or employment benefit will require a Qualified Domestic Relations Order (QDRO), in addition to the final divorce decree, to tell it how the asset is to be divided between the spouses. The QDRO is a specialized legal document that must comply with federal law and any additional requirements of the plan administrator. It is imperative that the family law attorney have the knowledge required to properly characterize retirement benefits and to follow through with having them actually divided by the employer.
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Wilhite & Lea, P.C. | Houston Family Lawyers
Contact Wilhite & Lea, P.C. Attorneys at Law for legal representation for marital retirement and employment benefits division in your divorce. Our Houston family lawyers are available to assist you in accomplishing an equitable settlement agreement or to fight for your fair share in court. Contact us by providing us with your case details in our online form or call (281) 537-2171. Wilhite & Lea, P.C. handles cases in Houston or surrounding areas, including Harris County, Montgomery County, Washington County, Grimes County, Fort Bend County and Waller County.