What Specific Criteria Should Be Negotiated In Dividing Retirement Accounts As Part Of A New Jersey Divorce?
By Noreen Bratton, NJCP
As a continuation to our earlier article entitled “Dividing Retirement Accounts as Part of a New Jersey Divorce” published on May 21, 2019, the following is a more in-depth review of the specific criteria that should be considered in negotiations involving division of your retirement accounts in your divorce action. While each retirement plan has its own specific parameters, you and your attorney should investigate the options best suited for you under the Plan’s requirements.
With regard to Defined Contribution Plans (i.e., 401(k), 403(b), 457, Savings Plan, Profit Sharing Plan):
- Should the Alternate Payee’s award be subject to earnings (i.e., interest, dividends, gains and/or losses) from the date of Complaint filing through the date of segregation of the Plan?
- Does the Participant of the Plan represent that there is an exempt portion of the account that needs to considered (i.e., premarital balance and/or post-date of complaint contributions and earnings thereon)?
- Is there an outstanding loan balance associated with the account? Who is responsible for the loan balance upon division?
- Does the Plan require the payment of an administrative fee to divide the account? If so, who pays it?
With regard to Defined Benefit Plans (i.e., Pensions, but not government sponsored):
- Should a separate interest Order or a shared interested Order be implemented for this Plan? Under a separate interest Order, the Alternate Payee will automatically collect until his/her own death if the Participant dies after the Alternate Payee’s commencement of benefits. Under a shared interest Order, the Alternate Payee will collect benefits until his/her own death, but the benefit amount for both parties will be equally reduced by the cost of the benefit. Under this shared interest Order, should the Alternate Payee not receive survivor benefits upon the Participant’s death post-retirement?
- Should the Alternate Payee share in any and all cost of living adjustments?
- Should the Alternate Payee share in an early retirement subsidy for this Plan?
- Does the Plan permit the Alternate Payee to assign his/her benefit to another Alternate Payee upon the Alternate Payee’s death before the Alternate Payee has commenced benefits?
- Does the Plan permit the Alternate Payee to receive survivor benefits upon the Participant’s death pre-retirement?
With regard to State Government Sponsored Plans such as the Public Employees’ Retirement System (PERS):
- How is the coverture fraction defined?
- Should the Alternate Payee share in any and all cost of living adjustments?
- Should the Alternate Payee receive a death benefit, if available, providing a refund to the Alternate Payee part of the Participant’s contributions, if any contributions remain upon death of the Participant?
- Should the Participant elect survivor benefits for the benefit of the Alternate Payee, if available? This election will reduce the benefits to both parties It is important to note that this option is not available for the New Jersey Police and Fireman’s Retirement System (PFRS).
With regard to Federal Government Sponsored Plans such as the Federal Employees’ Retirement System (FERS):
- How is the coverture fraction defined?
- Should the Alternate Payee share in any and all cost of living adjustments?
- Should the Participant elect for a pro rata share of survivor benefits for the benefit of the Alternate Payee? If so, this election results in a deduction from benefits. Which party’s benefit receives the deduction or is it shared?
- In the event of the death of the Alternate Payee, is the assigned portion of Alternate Payee’s benefit for this Plan paid to the Participant, to the surviving children of the marriage, or to the Alternate Payee’s Estate?
With regard to Military Pensions:
- Specifically define the branch of service of the Participant.
- How is the coverture fraction defined?
- Should the Alternate Payee share in any and all cost of living adjustments?
- Should the Participant elect for survivor benefits for the benefit of the Alternate Payee?. If so, this election results in a deduction from benefits. Should the parties share the deduction or is one party responsible for the deduction?
Negotiating the terms of the division of retirement accounts in a New Jersey divorce action within the parameters of each individual Plan requirements can be quite complex. Please contact our Mt. Laurel, New Jersey office and discuss your matter with one of our attorneys. Retirement accounts are extremely important assets in a divorce case and you should not make such significant decisions without expert advice from one of our attorneys.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Noreen Bratton is a New Jersey Certified Paralegal (NJCP) in Obermayer’s Mt. Laurel office.
