When a couple is divorcing, retirement assets are often some of the most critical assets to divide appropriately. Instruments like 401(k) accounts and pensions must be divided between the spouses, because most spouses will not have planned for retirement without at least some of those funds being present. However, unlike many other assets, it is not generally possible to simply split the proceeds of a retirement account down the middle. There is a specific procedure that must be followed under Illinois law to ensure that the asset is divided equitably.
Determining a Pension’s Value
Two factors go into determining the value of a pension for purposes of marital property division. The first is whether or not the pension is, in fact, marital property. Generally, the value of the pension that accrued during the marriage is considered marital property, and the value that was there beforehand is not. Some judges may hold that these funds have commingled, but such a determination is dependent upon the facts of your particular case.
The second factor involves assessing what type of plan it is. Some pensions are called defined contribution, with a specific amount taken out of one’s check each pay period, while some are defined benefit, which promise a specified lump sum or predetermined pension payments. Defined contribution plans are fairly easy to value if one has statements at hand because the amount contributed is consistent and clear. Defined benefit plans, by comparison, are more difficult and usually require specific expertise from a financial professional before a number can be determined.
QDROs and QILDROs
Once the value has been determined, a document referred to as a QDRO is required in order to move the process forward. QDRO stands for Qualified Domestic Relations Order, and it establishes the alternate payee—your ex-spouse—who is entitled to receive a share of your retirement plan. QDROs must contain specific information, such as the person’s name and personal information, the dollar amount to which the person is entitled, and any provisions regarding death benefits and cost-of-living increases.
In Illinois, where the Illinois Pension Code governs some retirement assets, you may also need a document called a QILDRO, or Qualified Illinois Domestic Relations Order. QILDROs apply to pension plans from public sector jobs, such as those in the Chicago Public Schools or governmental service. The Employee Retirement Income Security Act (ERISA) does not apply to public sector plans, and as such, the requirements for a QDRO do not apply to QILDROs, even though the end format of both documents are similar. It is important to know which one you will require, as one document is not replaceable by the other.
Ask a Knowledgeable Attorney
Asset division is by far the most complex, and one of the most heated, aspects of most divorces. If you need help negotiating an equitable property settlement, consider enlisting an experienced attorney. The skilled Kane County property division attorneys at Bochte, Kuzniar & Navigato, P.C. are well-versed in such cases, and are happy to help you get through yours. Call 630-377-7770 for a free consultation today.