Which part is marital
In New York, the part of a retirement asset earned during the marriage is generally marital property regardless of whose name is on the account, while the part earned before the marriage or after the divorce action begins is usually separate. For a defined contribution account such as a 401(k), that often means tracing contributions and growth across those dates. For a pension that pays a monthly benefit, courts commonly use a fraction comparing the time worked during the marriage with the total time worked. Rollovers, loans against an account, and early withdrawals during the marriage can complicate the tracing. The figures are worth checking before any trade against the house or other property is agreed.
Different plans, different orders
Many private employer plans can be divided only through a qualified domestic relations order, which the plan administrator reviews against its own rules before it takes effect. IRAs are usually divided by a transfer incident to divorce rather than by that kind of order. Government plans, including federal, state, municipal, and military retirement systems, follow their own rules and forms, so an order drafted for a private plan may not work for them. Survivor benefits deserve attention, because a former spouse's share of a pension can be lost if the participant dies first and the order does not address it. Gather recent statements, each plan's summary description, and any beneficiary designations for every account either of you holds.
Taxes and timing in the settlement
A pre-tax retirement dollar and an after-tax dollar in a bank account are not worth the same, so swapping retirement assets for other property usually calls for an adjustment. Cash taken from an employer plan under a qualified order can be treated differently for early-withdrawal purposes than cash taken from an IRA, which matters if one spouse needs funds right away. Market swings between the valuation date and the date of transfer also raise the question of whether gains and losses should be shared. At the outset we list every plan, decide which ones need an order, and talk about whether dividing or offsetting each one fits your goals. We also settle who will draft and submit the orders, since dividing retirement assets is not finished until each plan accepts its order.
