Contributions made from the working spouse’s wages to the working spouse’s retirement accounts during the marriage would be considered marital property and subject to distribution under Maryland law.
There’s a difference between pensions, which are known as defined benefit plans and retirement plans such as 401Ks or Roth IRAs, which are known as defined contribution plans. Defined benefit plans, which all refer to as pensions are commonly divided on an “if and when” basis. Division of a pension on an “if and when” basis means that a spouse may be granted a fractional share of the other spouse’s pension when that pension is received.
However if a court is put on notice by a spouse, and a spouse objects to a division of a pension on an “if and when” basis, a court may need to calculate the present value of the pension and determine what, if any monetary reward it will grant. If a court determines a pension’s present value and grants a monetary award to the other spouse, the court has the discretion to order payment in a lump sum or installments. The method of payment is largely dependent upon the spouse’s other assets and financial situation.
Defined contribution plans such as 401Ks or Roth IRAs are usually totaled up and then divided equally by a court. Generally the spouse with more retirement assets in their individual name will be ordered to make a lump sum transfer to the other spouse in an amount to be determined by the court.
If a court grants one spouse a fractional share of the other spouse’s pension, a court will enter a retirement benefit order to embody the terms of the payment. If the court grants one spouse a lump sum transfer from the other spouse’s defined contribution plan, the court will enter a separate retirement benefit order to effectuate that transfer. The only type of pension benefit that cannot be divided under Maryland law is a VA disability compensation benefit.
Vince Wills and Christina DeVault are divorce attorneys from Dragga, Hannon & Wills in Rockville, Maryland. A Fellow of the prestigious American Academy of Matrimonial Lawyers, Vince has co-authored numerous published articles on family law topics. Super Lawyers has named him as a top attorney for Maryland and the Washington Metropolitan area. Christina’s practice includes representing clients at all stages of family law, helping her clients make important decisions with confidence. To learn more about Vince and Christina, visit DraggaLaw.com.