How Are 401(k)s and Pensions Divided in Divorce?

By Jones & Associates Law P.C.

People in Pennsylvania share their various properties during their marriages, but if the couple divorces, they need to divide all of the property that they acquired during the marriage. It does not matter which spouse acquired the property or earned the income, both spouses have a right to the property either one of them acquired.

The property acquired during the marriage is done equitably and in order to do this, people need to determine the value of their various pieces of property. This can be a complicated process by itself, but once all of the property is valued, the couple can start determining who will receive which property.

Some property is easier to divide than other property though. For instance, people cannot physically split their home in half. Dividing retirement accounts such as 401(k)s or pensions are more difficult as well because of laws that govern those types of accounts.

People Need Special Orders to Divide Certain Retirement Accounts

Typically, people cannot withdraw money from those accounts until they are retired otherwise they will have to pay penalties in addition to the income tax on the withdrawal.

However, if couples are dividing these accounts through their divorce, they can do so without incurring those fees, but they need to use special orders called Qualified Domestic Relations Orders (QDRO). These order the plan administrators to distribute funds to the spouse as if they were the plan participant.

These orders need to meet very specific requirements to be valid though. They also cannot give the nonparticipant any benefits the participant does not possess. There also must be enough funds in the account to give the nonparticipant the full award granted in the divorce.

Given the laws that govern 401(k)s and pensions, it is important that people going through a divorce in Pennsylvania have the proper language not only in their divorce decree but also in their QDROs to ensure that each spouse receives what they were ordered to receive.

Property division can be a complicated part of a divorce and consulting with experienced attorneys who may be able to guide people through the process could be beneficial.