Parting Before Death or Taxes:
Dividing Government Retirement Benefits in a Minnesota Divorce
When people think of dividing up property in a divorce, it’s usually bank accounts, furniture and houses that come to mind. One type of property that it’s easy to overlook in preparing for divorce is retirement benefits.
While there are a vast array of retirement benefits out there, in this post we’re specifically considering government retirement/pension benefits. Even this subcategory comes in a number of different flavors that befits what can, at times, be a vast array of bureaucracy. Remember this is the government after all! For a start, there are different federal and state employee retirement plans. These include the Federal Employee Retirement System (FERS), the Civil Service Retirement System (CSRS), the Minnesota Service Retirement System (MSRS), Teacher Retirement Account (TRA) the thrift savings plan (TSP), and the Minnesota Public Employees’ Retirement Association (PERA). In addition, there is military retired pay, railroad retirement benefits, and union sponsored plans.
As you can see, there is a great deal of variety when it comes to pensions and retirement accounts. You (and really your lawyer) need to approach this in a open-minded fashion since here are a lot of different types of government retirement benefits to consider when thinking about the division of your property in a Minnesota divorce.
So, what can happen to this property as a result of a divorce? Short answer is it is divided. Annuities from the account or a specified dollar portion of the pension (called a defined benefit plan) can and will be divided between the divorcing spouses. Second, retirement benefits can be garnished for alimony or child support.
It’s important to remember the rule which is that on 401k’s and pensions it doesn’t matter whose name is on the account, Minnesota is a marital property state so the division is usually equal.
Role of the QDRO
You might have heard of a qualified domestic relations order (QDRO often pronounced “QUAD-RO or “QUADRO”). This is the type of order that a court normally enters when dividing private sector pension plans. However, there is an entirely different set of laws governing private sector pension plans, and QDROs may not be valid for the division of government plans like FERS and CSRS. What that means for you: don’t download a sample QDRO off the internet, fill it in, and consider your self-represented divorce complete. Talk to an attorney who is familiar with the division of government retirement benefits. I know it sounds self-serving (after all I am an attorney who is familiar with the division of government retirement benefits!) but you have such an incredible amount to lose if you make a mistake it is truly stupid to not hire an attorney at least for this limited issue.
Retirement plan beneficiaries
Finally, after your divorce judgment, don’t forget to update the beneficiary designation on your retirement accounts if necessary. For one thing, divorce does not affect the beneficiary designation for government plans like FERS. That means your now-ex could be the unwanted beneficiary of your interest in the account after you die. With regard to Minnesota plans like PERA, under Minnesota law, the designation of a spouse as your beneficiary is revoked upon divorce. That avoids the problem of your ex being an unwanted beneficiary, but keep in mind that your divorce judgment’s property division may require you to name your ex as the beneficiary. Because that designation has just been revoked by the divorce, you need to fill in a beneficiary change form to do this.
Mankato, Minnesota 56001