Division of Retirement Benefits

content12_3 (1)Michigan law requires that every Judgment of Divorce or Judgment of Separate Maintenance entered within the state provide for parties’ rights in regards to any retirement benefits. Vested retirement benefits accumulated during a marriage must be taken into account in property settlements. Unvested benefits may be considered where just and equitable. Whether retirement benefits accrued before or after a marriage may be considered part of the marital estate. Retirement benefits included in the marital estate may be divided between the spouses by one of two methods: (1) the offset method which does not actually divide retirement benefits but gives the non employee spouse other assets equivalent to his or her interest in the retirement benefits, or (2) the deferred division method which give the non employee spouse an actual interest in the employed spouse’s retirement benefits. Which method is utilized in a particular divorce case depends on the facts in the case. When determining what retirement assets there are to divide between the divorcing parties it must first be determined what retirement plans exist and what portion of those retirement plans is includible in the marital estate. The most commonly used vehicle for division of retirement benefits is called a Qualified Domestic Relations Order or QDRO. Most commonly the QDRO is a separate order entered at the time of or following the entry of the divorce judgment. Until a Qualified Domestic Relations Order is accepted by the Plan Administrator, the alternate payee or the non employee spouse is not entitled to any benefits under the retirement plan. The two most common types of retirement plans are: (1) a Defined Benefit Plan, commonly known as a pension plan. (2) a Defined Contribution Plan, an example of which is a traditional 401(k) where the employee contributes to the Plan.