Dividing Retirement Benefits During a Divorce in Massachusetts

Divorce can be one of the most challenging events in a person’s life. The division of retirement benefits during a divorce is often misunderstood. For many couples, these benefits represent a substantial part of the marital estate. Whether you’re nearing retirement or still years away, understanding your rights when dividing retirement benefits in a Massachusetts divorce is essential to protecting your financial future.

How Does Equitable Distribution Apply to Retirement Accounts?

Massachusetts follows what is known as the equitable distribution model when dividing property during a divorce.

This means the court will divide marital property as it determines to be fair but not necessarily equal. Retirement accounts and pension benefits are generally considered marital property if earned or contributed to during the marriage. So, even if a retirement plan is in your name, your spouse may have a legal claim to a portion of it.

What Types of Retirement Benefits May Be Divided?

The types of retirement benefits that may be divided in a divorce include traditional pensions, 401(k)s, 403(b)s, 457 plans, Individual Retirement Accounts (IRAs), and retirement plans for government employees such as military or federal pensions. Massachusetts state and municipal retirement plans are also subject to division, though the legal process may be slightly different than with private sector plans.

How is the Marital Portion of a Benefit Determined?

Only the portion of a retirement benefit earned during the marriage is typically considered marital property. If you contributed to a retirement account before and during your marriage, the court will usually consider only the value accrued during the marriage divisible. In some cases, courts will apply the coverture formula to calculate how much of a retirement benefit is marital. This formula considers the length of time the benefit was earned during the marriage relative to the total duration of the benefit’s accumulation.

What Is a QDRO and Why Do You Need One?

When dividing certain retirement accounts, Massachusetts courts generally require a special legal document called a Qualified Domestic Relations Order, or QDRO. A QDRO instructs the retirement plan administrator to transfer a portion of the benefits to the former spouse, as laid out in the divorce agreement or court order. It’s important to note that simply stating in the divorce agreement that benefits should be split isn’t enough. A QDRO must be prepared, submitted, and approved. Without one, the plan administrator is not legally authorized to divide the benefits.

How Are Government and Public Employee Plans Divided?

A different process applies to government and military retirement plans, including those for Massachusetts state employees. Instead of a QDRO, these plans typically require a Domestic Relations Order or DRO. The purpose of the DRO is to divide retirement benefits following a divorce, but the form and language comply with the specific rules of the public retirement system. The Massachusetts Public Employee Retirement Administration Commission (PERAC) offers guidance and standardized forms for these DROs.

How Are Retirement Benefits Valued?

Valuing retirement benefits can be complicated. For accounts like 401(k)s and IRAs, it’s relatively easy to determine the value since they have a current account balance. Pensions require a more detailed analysis. Pensions are often valued based on a formula including salary, years of service, and the employee’s age. In some cases, the parties might hire a pension valuation expert to calculate the present-day value of future pension payments. This can help the court or the parties decide how to divide the asset or offset it with other marital property.

What Are Asset Offsets?

An offset arrangement is an option couples might consider. Instead of dividing a retirement account, the spouse with the retirement benefit may keep the full amount. In contrast, the other spouse receives marital assets of equal value, such as a larger share of the home equity. This approach can simplify the division process, but it’s essential to understand the tax implications and growth potential of each asset before agreeing to an offset.

What About Social Security?

Many people also wonder how divorce affects Social Security benefits. While Social Security benefits cannot be divided by a divorce court, you may still be eligible to claim spousal benefits based on your ex-spouse’s work record. To qualify, your marriage must have lasted at least 10 years, you must be at least 62 years old, and you must be unmarried. If you meet these conditions and your own Social Security benefit is less than half of your ex-spouse’s benefit, you may be entitled to claim the higher amount. This does not reduce your ex-spouse’s benefits or affect their current spouse if they remarry.

How Do Massachusetts Courts Decide?

Massachusetts courts look at various factors when dividing retirement benefits and other property. These include the length of the marriage, the age and health of both spouses, their respective incomes and earning capacities, the contributions each made to the marriage, and their future financial needs. The court has great discretion and will try to make a fair division, though not necessarily equal. A family law attorney can be invaluable when navigating divorce, especially when substantial retirement assets are involved.

Protect Your Retirement in Divorce – Get the Legal Help You Deserve

Are you going through a divorce in Massachusetts? Don’t leave your financial future to chance regarding retirement benefits. Whether dealing with the divisions of pensions, 401(k)s, IRAs, or government retirement plans, you need an experienced divorce attorney who understands how to protect what you’ve earned. The Martino Law Group, LLC helps clients navigate the complexities of dividing retirement assets fairly and legally. Call (781) 531-8673 for a free case evaluation.