"How do I get my husband's pension?"

Marge and Joe are getting a divorce. Marge wants a portion of Joe's pension. How does she get her interest in Joe's pension?

First, let's clarify what a pension is. These days, "pension" is a generic term for a variety of plans that include:

• Profit sharing plan, including 401(k) plan
• Money purchase pension plan
• Tax sheltered annuity (403(b) annuity plan)
• Defined benefit pension plan

The first three types of plans listed have participant account balances; that means that Joe has an account balance, just like an investment account. The defined benefit plan has no participant account balance; only an actuary can determine the value of the account at a point in time.

When can Marge get the pension? The general rule is that Joe's account can be split between his interest and Marge's. Marge can either keep her share in the company plan or roll it over into an IRA she sets up under a Qualified Domestic Relations Order (QDRO) that her attorney prepares and files for her. It is crucial that Marge gets a QDRO -- with it she has a right to Joe's pension interest AND can roll it over to her own IRA if she chooses. Without it, there can be dire tax consequences for both Joe and Marge.

But even a QDRO can't force a plan to give Marge money before Joe has a right to it. Especially with defined benefit pension plans, participants may need to wait until reaching retirement age to get distributions. And rather than being able to roll over an account balance into an IRA, Marge may be limited to getting a monthly income at the point that Joe is entitled to retirement benefits.

Remember that whenever Marge gets Joe's pension, it will be taxable income. Consider this when splitting assets during your own marital settlement.

About the author of this Illinois Divorce FAQ:

Linda Forman, CPA, P.C., has practiced financial and tax guidance, retirement planning and ERISA issues, litigation support, and other areas of accounting in the Chicago area for over 30 years. She can be reached at (847) 316-1040. View her Divorce Magazine profile.

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