When dividing a pension plan, a Qualified Domestic Relations Order will often be used. This order specifies that someone other than the employee should benefit from the pension. This person would be the ex-spouse after the divorce.
This is a useful tool because it means that you can get divorced and divide up future assets, perhaps protecting your own ability to retire. But how does the court determine what percentage of the pension plan should be given to the other payee through the QDRO? There are a lot of different factors to consider.
The length of the marriage
While every case is unique and the financial calculations can certainly become complicated, one of the main things to consider is simply the length of the marriage. This can then be compared to the length of employment, as this was the time at which the other person was earning the pension.
For instance, imagine that a worker put in 40 years to earn their pension. They were married for 20 of those years, in the middle of their employment. The pension payment would then be for half of the pension that was earned during those 20 years, dividing those earnings between both people. But since the marriage only lasted for half as long as the employment, this means that the alternative payee would only get roughly 25% of the monthly pension payments once they start to be distributed.
As noted, things can certainly get more complicated than this, but that’s the base calculation that is often used. Be sure you know exactly what steps to take.