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What Will Happen to My Pension in My Divorce?

On Behalf of | Jan 28, 2020 | Uncategorized |

Are you expecting to file for divorce soon, and do you have questions about what will happen to your pension? In general, unless you have a prenuptial agreement that expressly states that you will keep your pension and that it will not be divided in the event of divorce, at least a portion of your pension is likely to be classified as marital property and will be distributable. Under Michigan law (MCL 552.401), most property acquired prior to the date of marriage is classified as separate property and is not subject to division. Most property acquired after the date of marriage is classified as marital property and will be subject to division. There are some exceptions, of course, yet pensions are not typically exceptions.

As such, your pension will most likely be subject to division, at least in part, in your Michigan divorce. When it is divided, it will likely need to be distributed with a Qualified Domestic Relations Order (QDRO).

What is a Pension?

It is important to understand what a pension is in order to understand how it will be treated in a divorce case in Michigan. As an article in The Balance explains, a pension is one type of retirement plan, and it is designed to provide the person with a monthly income in retirement. Pensions can be created either by public or private employers. When it comes to private employers, usually only very large companies will offer pensions. Pensions are more common with public employers, and most people think about pensions as those retirement accounts offered by public employers, such as local or federal government organizations.

The U.S. Department of Labor provides specific rules for pension plans, including how much money the employer must contribute so that you can receive a defined amount of money each month during your retirement. The amount of money you receive typically depends upon your years of service with the employer, your age at the time of retirement, and the compensation you earned from the employer prior to retirement. To be clear, pension plans are different from other types of retirement plans offered by employers, such as 401(k) plans.

Classifying Your Pension

Depending upon when you began working for the employer and expecting a pension upon retirement, your pension benefits may be partially separate property (for earnings prior to the marriage) and partially marital property (for earnings after the date of marriage), or all pension benefits may be classified as marital property. For any pension benefits classified as marital property, the court will need to determine how to divide those benefits, along with other marital property, in a way that is equitable to both parties.

Using a QDRO (or DRO) to Distribute Pension Benefits

As the Michigan Office of Retirement Services explains, a Domestic Relations Order (DRO) must be used to divide public pension benefits in a divorce, and it must be filed with the state’s retirement system. A DRO that meets the requirements of Michigan law can then be administered by the retirement system, and pension benefits can be paid. A DRO allows for pension benefits to be distributed without the typical penalty for early withdrawal.

If your pension benefits are not through a public employer, a QDRO is still essential to distribute benefits without paying the early withdrawal penalty.

Contact a Divorce Lawyer in Michigan

If you have questions or concerns about pension benefits and your divorce, a divorce lawyer in Michigan can assist you. Contact the Law Offices of Michael A. Robbins for more information about how we can help with your divorce.